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Rule Book
Of
Karachi Stock Exchange Limited
Gazette Notified on June 18, 2014
Karachi Stock Exchange Regulations
AMENDMENTS TO KSE REGULATIONS
1.
Amendments approved by SECP on June 10, 2014 and Gazette Notified on August 13, 2014:
a)
b)
c)
d)
2.
Amendments approved by SECP on July 11, 2014 and Gazette Notified on August 27, 2014:
a)
b)
3.
Sub-clause 19.8.5. of KSE Regulations has been amended.
Schedule-IX to Chapter 19 has been amended.
Sub-clause 21.3.3.(b)(i) of KSE Regulations has been amended.
Amendments approved by SECP on December 10, 2014 and Gazette Notified on January 14, 2015:
a)
b)
c)
d)
e)
5.
New para in sub-clause 5.19.4.(c). of Chapter 5 has been inserted.
Sub-clauses 6.1.(k)., 6.1.(l)., 6.1.(m)., 6.11.(b)., 6.11.(e)., and 6.11.(h). of KSE Regulations have been amended.
Amendments approved by SECP on December 04, 2014 and Gazette Notified on December 24, 2014:
a)
b)
c)
4.
New para (x) in sub-clause 3.2 of Appendix-2 “Issue/Offer of Shares through Book Building” to Chapter 5 has been
inserted.
Clause 9 of Appendix-2 “Issue/Offer of Shares through Book Building” to Chapter 5 has been amended.
New para (d) in sub-clause 11.1.2. of KSE Regulations has been inserted.
Sub-clause 11.1.8. of KSE Regulations has been amended.
Para (f) in sub-clause 19.5.8. of KSE Regulations has been deleted.
Sub-clause 19.5.9. of KSE Regulations has been amended.
Schedule-III to Chapter 19 has been amended.
Sub-clause 21.2.4. of KSE Regulations has been deleted.
Clause 21.7. of KSE Regulations has been amended
New Chapter approved by SECP on January 29, 2015 and Gazette Notified on February 25, 2015:
The Regulations Governing Listing and Trading of Equity Securities of Small and Medium Enterprises (SMEs) have been
approved by SECP as Chapter 5A of KSE Regulations.
6.
Minor Amendments approved by SECP on February 6, 2015 and Gazette Notified on March 25, 2015:
a)
b)
7.
Amendments approved by SECP on February 6, 2015 and Gazette Notified on March 18, 2015:
a)
b)
8.
Sub-clause 4.19.1. of KSE Regulations has been amended.
Sub-clause 6.1 of Schedule-A “Scope of Audit” to Chapter 23 has been amended.
Amendments approved by SECP on February 13, 2015 and Gazette Notified on April 1, 2015:
a)
b)
9.
Typographical errors/duplications have been removed from the KSE Regulations.
Insertion of “Government Debt Securities (GDS) Market Regulations” as Chapter 6 of KSE regulations has been
approved by SECP.
Clause 8.15. of KSE Regulations has been amended.
Sub-clause 8.17.5. of KSE Regulations has been amended.
Amendments approved by SECP on February 18, 2015 and Gazette Notified on April 15, 2015:
New clauses 3.10 and 3.11 of KSE Regulations have been inserted.
10. Amendments to Code of Corporate Governance approved by SECP on February 23, 2015 and Gazette Notified on
April 15, 2015 :
a)
b)
Sub-clause 5.6.1.(d) of KSE Regulations has been amended.
Sub-clause 5.19.15. of KSE Regulations has been amended.
11. Amendments approved by SECP on April 13, 2015 and Gazette Notified on May 20, 2015:
a)
b)
Clause 4.19. of KSE Regulations has been amended.
Clauses 6 and 11 of Schedule-A “Scope of Audit” to Chapter 23 have been amended.
12. Amendment approved by SECP on April 14, 2015 and Gazette Notified on June 24, 2015:
Sub-clause 19.10.4. of KSE Regulations has been amended.
Karachi Stock Exchange Regulations
13. New Chapter and consequential amendments approved by SECP on May 18, 2015 and Gazette Notified on July 22,
2015:
a)
b)
c)
Sub-clause (xlvia) in clause 2.4. of KSE Regulations has been inserted.
The sub-clause 5.1.1.(m) of clause 5.1. has been deleted.
Listing of Debt Securities Regulations as Chapter 5B of KSE Regulations has been inserted.
14. Amendments approved by SECP on July 15, 2015 and July 24, 2015 and sent for Gazette Notification:
a)
b)
c)
d)
e)
f)
g)
h)
i)
New sub-clauses 4.19.6. and 4.19.7. of KSE Regulations have been inserted.
New clauses 4.23. and 4.24. of KSE Regulations have been inserted.
Sub-clause 5.6.1.(d) of KSE Regulation has been amended.
Sub-clause 5.6.2.(a) of KSE Regulation has been amended.
Sub-clause 19.3.2. of KSE Regulation has been amended
Sub-clause 19.10.7. of clause 19.10. has been deleted.
Existing sub-clause 19.10.8 of clause 19.10 has been renumbered as 19.10.7.
New sub-clause 1.11 of Schedule-A “Scope of Audit” to Chapter 23 has been inserted.
Existing sub-clause 1.11 of Schedule-A “Scope of Audit” to Chapter 23 has been renumbered as 1.12.
15. Amendments approved by SECP on November 02, 2015 and sent for Gazette Notification:
a)
b)
c)
Sub-clause 6.6.(c) of KSE Regulations has been amended.
Clause 6.12. of KSE Regulations has been amended.
Clause 6.13. of KSE Regulations has been amended.
16. Amendments approved by SECP on November 09, 2015 and sent for Gazette Notification:
a)
b)
New clause 4.25 of KSE Regulations has been inserted.
Sub-clause 19.5.4.of KSE Regulations has been amended.
Karachi Stock Exchange Regulations
PREFACE
Karachi Stock Exchange Limited (KSEL), formerly known as the Karachi Stock Exchange (Guarantee) Limited, was
corporatized and demutualized as a company limited by shares with effect from August 27, 2012 pursuant to promulgation of
Stock Exchanges (Corporatisation, Demutualization & Integration) Act, 2012 on May 7, 2012.
The above development necessitated a comprehensive review of the regulatory framework of the KSEL which was previously
set out in different sets of regulations resulting in duplication and difficulty in handling these regulations. In order to ensure
harmonization, conciseness, address redundancies and integration of the separate sets of regulations, it was endeavored to
consolidate these regulations at a single place in line with international best practices. Accordingly, with the joint efforts of KSEL
and the Securities and Exchange Commission of Pakistan (SECP), the Rule Book was compiled as a single consolidated
document and approved by the SECP in exercise of the powers conferred upon it under Securities and Exchange Ordinance,
1969.
The Rule Book also incorporates requisite regulatory amendments to the regulatory framework of the KSEL consequent to the
corporatization and demutualization of the KSEL. These amendments provide regulatory cover to a number of structural
changes at KSEL in the wake of demutualization including, segregation of regulatory and commercial functions of the KSEL,
introduction of the concept of Base Minimum Capital, formation of Regulatory Affairs Committee (RAC) and Regulatory Affairs
Division (RAD), the appointment of Chief Regulatory Officer (CRO) as the head of the RAD, recognition of the role of the RAC
and the CRO in the regulatory, enforcement and arbitration domains etc.
The Rule Book is divided in chapters which represent the existing regulations of KSEL in an amended form and certain new
chapters have also been incorporated in the regulatory framework of the KSEL. The Rule Book will be useful for the regulated
entities of the Exchange and stock market investors at large for understanding the regulatory framework, rights and obligations
as well as recourse available to them in case of dispute.
As a result of above developments, KSEL comes at par with any developed stock exchange. The KSEL acknowledges the
cooperation extended by the SECP, the Board of Directors of KSEL, the RAC and the management team of KSEL in
formulation and implementation of the Rule Book.
Karachi Stock Exchange Regulations
FOREWORD
The Rule Book is a landmark achievement in the history of Karachi Stock Exchange Limited (KSEL) as it strengthens the
regulatory framework of KSEL by providing a wider and deeper coverage to the securities market consequent to its
corporatization and demutualization.
The Rule Book will provide the regulated entities, investors, practitioners, educational institutions, associations, professional
accountancy bodies and all other readers with comprehensive coverage of the securities market regulations ultimately leading
to widespread regulatory awareness and greater compliance.
I congratulate KSEL on this historic achievement.
Karachi Stock Exchange Regulations
FOREWORD
Karachi Stock Exchange Limited (KSEL) has the distinction of being the leading stock exchange of Pakistan by facilitating longterm capital mobilization for industry while providing an efficient and transparent platform for securities trading for investors.
Evolution of the regulatory and operating eco-system of KSEL has been an ongoing process. This process received a major
boost through the Corporatization and Demutualization Act of 2012 which provided an opportunity for a thorough review of the
myriad rules, procedures and policies governing KSEL’s operations, the role of various market participants and issuers of listed
securities, as well as ensuring investors’ interest.
In this context, the present compilation of rules and regulations in a single document (the Rule Book) will provide the necessary
foundation for the regulatory eco-system that allows clarity of roles and responsibilities for capital market participants. It is a
pleasure to see the launch of the first ever consolidated regulatory document in the form of KSEL Rule Book.
Karachi Stock Exchange Regulations
FOREWORD
A fair, efficient and transparent regulatory system of the securities market is an important source of sustaining trust and
confidence of the market participants in the capital market. The implementation of the Rule Book is a significant step in this
direction. The Rule Book effectively updates the earlier regulatory system of the KSEL enforced prior to demutualization of
KSEL with clearly spelled out rights and obligations in compiled form for easier understanding with relevant contexts. In my
opinion, this will open doors to new era of effective regulatory and compliance regime for smooth and fair operations of the
securities business.
Our efforts will remain to continuously evolve the contents of Rule Book and introduce or revise chapters/clauses to improve
effectiveness and address redundancies for robust regulatory and enforcement regime.
Karachi Stock Exchange Regulations
ACKNOWLEDGEMENT
Karachi Stock Exchange Limited (KSEL) acknowledges with deep appreciation the constant supervision, guidance and support of
the following members of the Regulatory Affairs Committee (RAC) of KSEL in compilation and implementation of the first ever
Rule Book of KSEL.
MEMBERS OF RAC
Syed Muhammad Shabbar Zaidi (Chairman - RAC)
Mr. Abdul Qadir Memon
Mr. Asif Qadir
Mr. Kamal Afsar
Karachi Stock Exchange Regulations
TABLE OF CONTENTS
Chapter 1: PREAMBLE, SHORT TITLE AND COMMENCEMENT ....................................................... 1
1.1.
1.2.
1.3.
1.4.
PREAMBLE:………...…………………….……………………………………………………………… 1
SHORT TITLE:……….………………….….…………………………………………………………...... 1
COMMENCEMENT..………………………………………………………….………….…………….... 1
POWERS TO RELAX REGULATORY REQUIREMENT(S):……………………...…...................... 1
Chapter 2: INTERPRETATION AND DEFINITIONS .............................................................................. 2
2.1.
2.2.
2.3.
2.4.
GENERAL PRINCIPLES OF INTERPRETATION: ........................................................................ 2
APPLICABILITY: ........................................................................................................................... 2
SEVERABILITY: ........................................................................................................................... 2
GENERAL DEFINITIONS: ............................................................................................................ 2
Chapter 3: KARACHI STOCK EXCHANGE LIMITED ........................................................................... 7
3.1.
3.2.
3.3.
3.4.
3.5.
3.6.
3.7.
3.8.
3.9.
3.10.
3.11.
FIT & PROPER CRITERIA FOR DIRECTORS OF THE EXCHANGE: .......................................... 7
CONFLICT OF INTEREST: ........................................................................................................... 7
POWERS OF THE EXCHANGE: .................................................................................................. 7
DEPOSIT, FEE, CONTRIBUTION AND OTHER SUMS:............................................................... 7
DESIGNATED TIME SCHEDULE: ................................................................................................ 7
HOURS OF OPERATION: ............................................................................................................ 7
DISSEMINATION OF RELATED INFORMATION BY THE EXCHANGE TO OTHER MARKET
ENTITIES: ...................................................................................................................................................... 8
SHARING OF INFORMATION AMONGST THE COMMISSION, EXCHANGE, CDC AND
NCCPL: ........................................................................................................................................ 8
EXCHANGE’S POWER TO TAKE CONSEQUENTIAL ACTIONS AGAINST A UIN ON ITS
NON-COMLIANCE WITH NCCPL REGULATIONS: ..................................................................... 8
EXCHANGE’S POWER TO IMPOSE RESTRICTIONS ON A BROKER CONSEQUENT UPON
IMPOSITION OF RESTRICTIONS ON SUCH BROKER BY CDC AS ITS PARTICIPANT: ........... 8
EXCHANGE’S POWER TO SUSPEND A BROKER CONSEQUENT UPON ITS SUSPENSION
BY CDC AS ITS PARTICIPANT OR NCCPL AS ITS CLEARING MEMBER: ............................... 9
Chapter 4: TRADING RIGHTS ENTITLEMENT (TRE) CERTIFICATE ................................................ 14
4.1.
4.2.
4.3.
4.4.
4.5.
4.6.
4.7.
4.8.
4.9.
4.10.
4.11.
4.12.
4.13.
4.14.
4.15.
4.16.
4.17.
4.18.
COMPLIANCE WITH ACT/REGULATIONS: ............................................................................... 14
ENTITLEMENT OF TRE CERTIFICATE HOLDER TO TRADE: .................................................. 14
ISSUANCE OF TRE CERTIFICATES BY THE EXCHANGE: ...................................................... 14
APPLICATION TO THE EXCHANGE AND ELIGIBILITY CRITERIA FOR OBTAINING TRE
CERTIFICATE: ........................................................................................................................... 14
TRANSFER OF TRE CERTIFICATE:.......................................................................................... 15
APPLICABILITY OF ELIGBILITY CRITERIA ON CONTINUED BASIS: ...................................... 15
DECISION OF THE EXCHANGE: ............................................................................................... 16
TRANSFER OF SHARES, CHANGE OF LEGAL STATUS, OWNERSHIP: ................................ 16
RELINQUISHMENT/SURRENDER AS A TRE CERTIFICATE HOLDER: ................................... 16
ISSUANCE OF NOC PRIOR TO TRANSFER OF TRE CERTIFICATE: ...................................... 16
IN CASE OF ACTIVATION OR REACTIVATION OF A TRE CERTIFICATE HOLDER AS
BROKER: .................................................................................................................................... 17
ACCREDITED AGENT:............................................................................................................... 17
RESEARCH REPORTS BY THE BROKER AND COMMUNICATION WITH MEDIA: ................. 18
REPORT OF VIOLATION OF REGULATIONS: .......................................................................... 18
PAYMENT OF FEE/DEPOSIT: ................................................................................................... 18
DISCIPLINARY MATTERS: ........................................................................................................ 18
REGULATIONS FOR THE MAINTENANCE OF A STANDARDIZED ACCOUNT OPENING
FORM: ........................................................................................................................................ 18
KNOW YOUR CUSTOMER AND CUSTOMER DUE DILIGENCE: ............................................. 19
Karachi Stock Exchange Regulations
4.19.
4.20.
4.21.
4.22.
4.23.
4.24.
4.25.
SEGREGATION OF CLIENTS’ ASSETS BY THE BROKERS: ................................................... 19
CONFIRMATION OF CLIENTS’ ORDERS BY TRE CERTIFICATE HOLDERS/BROKERS: ....... 20
GENERAL OBLIGATIONS OF TRE CERTIFICATE HOLDERS/BROKERS RELATING TO
LEVERAGED MARKETS: ........................................................................................................... 20
TRADING BY EMPLOYEES OF BROKERAGE HOUSES: ......................................................... 20
MANDATORY PROVISION OF QUARTERLY ACCOUNT STATEMENT TO CLIENTS: ............. 21
STATUTORY AUDIT OF THE BROKERAGE HOUSES:............................................................. 21
RECEIPT/PAYMENT OF AMOUNT FROM/TO CUSTOMERS BY THE BROKERAGE
HOUSES: ................................................................................................................................... 21
Chapter 5: LISTING OF COMPANIES AND SECURITIES REGULATIONS ....................................... 27
5.1.
5.2.
5.3.
5.4.
5.5.
5.6.
5.7.
5.8.
5.9.
5.10.
5.11.
5.12.
5.13.
5.14.
5.15.
5.16.
5.17.
5.18.
5.19.
5.20.
DEFINITIONS: ............................................................................................................................ 27
LISTING OF COMPANIES & SECURITIES: ............................................................................... 27
UNDERTAKING: ......................................................................................................................... 28
OFFER OF CAPITAL BY COMPANIES/MODARABAS TO THE GENERAL PUBLIC: ................ 28
PROSPECTUS, ALLOTMENT, ISSUE AND TRANSFER OF SHARES: ..................................... 29
DIVIDENDS AND ENTITLEMENTS: ........................................................................................... 31
ANNUAL GENERAL MEETINGS / ANNUAL REVIEW MEETINGS, ETC:………………… . ……..32
INCREASE OF CAPITAL & ALLIED ISSUES: ............................................................................. 32
LISTING OF SUBSIDIARY COMPANY & OTHER MATTERS: ................................................... 33
QUALITY OF AUDIT:…….…………………………………………………………………....................33
DE-LISTING, SUSPENSION AND DEFAULTERS’ SEGMENT: .................................................. 34
EFFECTS OF SUSPENSION OF TRADING: .............................................................................. 36
VOLUNTARY DE-LISTING: ........................................................................................................ 36
VOLUNTARY DE-LISTING OF A SECURITY SHALL BE SUBJECT TO THE FOLLOWING: ..... 37
PROCEDURE FOR VOLUNTARY DE-LISTING: ........................................................................ 37
TIME FRAME FOR COMPLETION FOR REQUIREMENTS: ...................................................... 38
RELAXATION: ............................................................................................................................ 38
LISTING AND ANNUAL FEES: ................................................................................................... 38
CODE OF CORPORATE GOVERNANCE: ................................................................................. 40
PENALTY:................................................................................................................................... 51
Chapter 5A: REGULATIONS GOVERNING LISTING AND TRADING OF EQUITY SECURITIES
OF SMALL AND MEDIUM ENTERPRISES (SMEs) ............................................................................. 64
5A.1.
5A.2.
5A.3.
5A.4.
5A.5.
5A.6.
5A.7.
5A.8.
5A.9.
5A.10.
DEFINITIONS: ............................................................................................................................ 64
ELIGIBILITY CRITERIA FOR LISTING OF EQUITY SECURITIES OF SMEs: ............................ 64
ISSUE OF EQUITY SECURITIES AT PREMIUM: ....................................................................... 65
LISTING PROCEDURE: ............................................................................................................. 65
CONTENTS OF INFORMATION MEMORANDUM: .................................................................... 65
APPOINTMENT AND DUTIES OF MARKET ADVISOR: ............................................................ 65
RESIGNATION OF MARKET ADVISOR:………………… .................................................. ……..66
APPOINTMENT AND FUNCTIONS OF MARKET MAKERS: ...................................................... 66
TRADING OF SECURITIES ON EXCHANGE, RISK MANAGEMENT AND ALLIED MATTERS: 66
NON-APPLICABILITY OF THE LISTING OF COMPANIES AND SECURITIES
REGULATIONS OF THE EXCHANGE:…………………………................................................... 67
5A.11. APPLICABILITY OF SUBSTANTIAL ACQUISITION LAWS:........................................................ 67
5A.12. AUDITED FINANCIAL STATEMENTS AND INFORMATION REQUIREMENT: .......................... 67
5A.13. REPORTING AND DISCLOSURE BY SME: ............................................................................... 67
5A.14. SUSPENSION OF TRADING: ..................................................................................................... 68
5A.15. DISCIPLINARY ACTIONS: .......................................................................................................... 68
5A.16. EXIT FROM THE SME BOARD: .................................................................................................. 68
5A.17. VOLUNTARY DE-LISTING OF SME FROM THE SME BOARD: ................................................. 68
5A.18. COMPULSORY DE-LISTING OF SME FROM SME BOARD: ..................................................... 68
5A.19. MIGRATION FROM SME BOARD TO THE MAIN BOARD: ........................................................ 69
5A.20. INITIAL AND ANNUAL LISTING FEES: ...................................................................................... 69
Karachi Stock Exchange Regulations
Chapter 5B: LISTING OF DEBT SECURITIES REGULATIONS .......................................................... 76
5B.1. APPLICABILITY OF REGULATIONS: ......................................................................................... 76
5B.2. DEFINITIONS: ............................................................................................................................ 76
5B.3. ELIGIBILITY FOR LISTING: ........................................................................................................ 76
5B.4. CONDITIONS FOR LISTING OF DEBT SECURITIES: ............................................................... 77
5B.5. PROCEDURE FOR LISTING OF DEBT SECURITIES UNDER THIS CHAPTER: ...................... 78
5B.6. ISSUE OF DEBT SECURITIES:.................................................................................................. 78
5B.7. CONTENTS OF INFORMATION MEMORANDUM:…………………................................... ……..78
5B.8. POST LISTING REQUIREMENTS: ............................................................................................. 78
5B.9. PAYMENT OF LISTING FEE: ..................................................................................................... 79
5B.10. FUNCTIONS OF A DEBT SECURITIES TRUSTEE..……………………...................................... 80
5B.11. APPOINTMENT AND FUNCTIONS OF MARKET MARKER: ...................................................... 80
5B.12. FUNCTIONS OF THE COMPLIANCE OFFICER: ........................................................................ 80
5B.13. CIRCUIT BREAKERS AND SUSPENSION OF TRADING: ......................................................... 80
5B.14. DISCIPLINARY ACTIONS: .......................................................................................................... 81
Chapter 6: GOVERNMENT DEBT SECURITIES (GDS) MARKET REGULATIONS ........................... 88
6.1.
6.2.
6.3.
6.4.
6.5.
6.6.
6.7.
6.8.
6.9.
6.10.
6.11.
6.12.
6.13.
6.14.
6.15.
6.16.
DEFINITIONS: ............................................................................................................................ 88
GOVERNMENT DEBT SECURITIES ELIGIBLE FOR TRADING UNDER THESE
REGULATIONS: ......................................................................................................................... 88
TRADING PARTICIPANTS: ........................................................................................................ 88
CLEARING PARTICIPANTS: ...................................................................................................... 89
PROCEDURE FOR ADMISSION OF TRADING PARTICIPANT AND CLEARING
PARTICIPANT: ........................................................................................................................... 89
TRANSMISSION OF INFORMATION BETWEEN THE EXCHANGE AND CLEARING
PARTICIPANT: ........................................................................................................................... 89
RIGHTS & OBLIGATIONS OF TRADING PARTICIPANT,CLEARING PARTICIPANT AND
ELIGIBLE CLIENT:……………………………………………………………………………………….89
DEALINGS ON THE GDS MARKET: .......................................................................................... 90
REQUEST FOR QUOTATIONS (RFQ): ...................................................................................... 90
TRADING HOURS OF GDS MARKET: ....................................................................................... 90
APPOINTMENT OF MARKET MAKER AND ANCILLARY MATTERS THEREOF: ..................... 90
RISK MANAGEMENT OF TRADES IN GOVERNMENT DEBT SECURITIES UNDER THESE
REGULATIONS: ......................................................................................................................... 91
TRADING, CLEARING AND SETTLEMENT PROCEDURES: .................................................... 91
SHUT PERIOD: .......................................................................................................................... 92
INITIAL DEPOSIT, TRADING FEE AND OTHER CHARGES: .................................................... 92
OVERRIDING EFFECT:.............................................................................................................. 92
Chapter 7: PROPRIETARY TRADING REGULATIONS ...................................................................... 97
7.1.
7.2.
7.3.
7.4.
7.5.
7.6.
7.7.
DEFINITIONS: ............................................................................................................................ 97
PROCEDURE FOR EXECUTION OF PROPRIETARY TRADING BY THE BROKER OR ITS
AGENT OR ANY ASSOCIATED PERSON: ............................................................................... 97
NO AGGREGATION OF ORDERS: ............................................................................................ 97
CONFLICT OF INTEREST AND DISCLOSURE BY BROKERS: ................................................ 97
SEPARATE ACCOUNT FOR PROPRIETARY TRADING: .......................................................... 97
MARKET INTEGRITY: ................................................................................................................ 98
PENALTY:................................................................................................................................... 98
Chapter 8: (A) KARACHI AUTOMATED TRADING SYSTEM (KATS) REGULATIONS ..................... 99
8.1.
8.2.
8.3.
DEFINITIONS: ............................................................................................................................ 99
ELIGIBILITY: ............................................................................................................................... 99
AVAILABILITY: ........................................................................................................................... 99
Karachi Stock Exchange Regulations
8.4.
8.5.
8.6.
8.7.
8.8.
8.9.
8.10.
8.11.
8.12.
8.13.
8.14.
8.15.
8.16.
8.17.
TICK SIZE: .................................................................................................................................. 99
QUEUE PRIORITY: .................................................................................................................... 99
INSERTION OF CLIENT'S CODE IN EVERY BID AND OFFER THROUGH KATS: ................... 99
DISCLOSED AND UNDISCLOSED VOLUME: ......................................................................... 100
TIME IN FORCE RESTRICTION: ............................................................................................. 100
CROSS TRADE: ....................................................................................................................... 100
CANCEL ORDER:..................................................................................................................... 100
CHANGE FORMER ORDER (CFO): ......................................................................................... 100
SETTLEMENT: ......................................................................................................................... 100
NEGOTIATED DEAL: ............................................................................................................... 100
SPECIAL TERMS ORDERS: .................................................................................................... 100
OPENING: ................................................................................................................................ 100
HALTS: ..................................................................................................................................... 101
GENERAL: ................................................................................................................................ 101
Chapter 8: (B) BONDS AUTOMATED TRADING SYSTEM REGULATIONS .................................... 103
8B.1. DEFINITIONS: .......................................................................................................................... 103
8B.2. ADMINISTRATION & EXERCISE OF POWERS: ...................................................................... 103
8B.3. DEBT MARKET SECURITIES (“SECURITIES”):....................................................................... 103
8B.4. ELIGIBILITY OF SECURITIES: ................................................................................................. 103
8B.5. AVAILABILITY: ......................................................................................................................... 103
8B.6. ORDER / TRADE PRICES, AND DATABASE FOR ACCRUED INTEREST CALCULATIONS: 103
8B.7. ORDER TYPES AND ATTRIBUTES FOR DEBT TRADES: ...................................................... 103
8B.8. QUOTE TYPES, ATTRIBUTES FOR DEBT MARKET TRADES AND CONFIDENTIALITY: ..... 103
8B.9. QUEUE PRIORITY: .................................................................................................................. 104
8B.10. INSERTION OF CLIENT'S CODE IN EVERY BID AND OFFER THROUGH BATS: .................. 104
8B.11. DISCLOSED AND UNDISCLOSED VOLUME: .......................................................................... 104
8B.12. CROSS TRADES: ..................................................................................................................... 104
8B.13. CANCEL ORDER: ..................................................................................................................... 104
8B.14. CHANGE FORMER ORDER (CFO): ......................................................................................... 104
8B.15. TIME IN FORCE RESTRICTION: .............................................................................................. 104
8B.16. MARKET OPENING: ................................................................................................................. 104
8B.17. MARKET HALTS: ...................................................................................................................... 105
8B.18. NEGOTIATED DEAL: ................................................................................................................ 105
8B.19. FEES: ........................................................................................................................................ 105
8B.20. RISK MANAGEMENT, CLEARING AND SETTLEMENT: .......................................................... 105
8B.21. GENERAL: ................................................................................................................................ 105
Chapter 9: INTERNET TRADING REGULATIONS ............................................................................ 106
9.1.
9.2.
9.3.
9.4.
9.5.
9.6.
9.7.
9.8.
9.9.
9.10.
9.11.
9.12.
9.13.
9.14.
9.15.
9.16.
DEFINITIONS: .......................................................................................................................... 106
APPLICABILITY: ....................................................................................................................... 106
ELIGIBILITY: ............................................................................................................................. 106
PROCEDURE FOR THE COMMENCEMENT OF INTERNET BASED TRADING SERVICES: . 106
BROKER CLIENT SERVICE ARRANGEMENT: ....................................................................... 106
SERVICE REQUIREMENT: ...................................................................................................... 107
INFORMATION AND INFRASTRUCTURAL SECURITY MEASURES: ..................................... 107
OPERATIONAL CAPACITY: ..................................................................................................... 107
SERVICE AVAILABILITY AND BUSINESS CONTINUITY: ....................................................... 107
SYSTEMS MODIFICATION: ..................................................................................................... 108
MONTHLY REPORTING: ......................................................................................................... 108
PERIODIC AUDIT, VULNERABILITY ASSESSMENT AND PENETRATION TESTING: ........... 108
GENERAL DISCLOSURES: ..................................................................................................... 108
CROSS TRADES: ..................................................................................................................... 108
SUSPENSION AND CANCELLATION OF INTERNET TRADING CERTIFICATE: .................... 108
INFORMATION ACCESSIBILITY: ............................................................................................. 109
Karachi Stock Exchange Regulations
Chapter 10: READY DELIVERY CONTRACTS MARKET REGULATIONS ....................................... 110
10.1.
10.2.
10.3.
10.4.
10.5.
10.6.
10.7.
10.8.
10.9.
10.10.
10.11.
10.12.
10.13.
10.14.
10.15.
10.16.
10.17.
10.18.
10.19.
10.20.
DEFINITIONS: .......................................................................................................................... 110
BASIC DEPOSIT:...................................................................................................................... 110
READY DELIVERY CONTRACT TRADING:............................................................................. 110
STANADARDIZED MARKETABLE LOTS: ................................................................................ 110
TRADING AND SETTLEMENT CYCLE: ................................................................................... 111
DETERMINING EX-PRICE OF SECURITY ON BOOK CLOSURE–1 SETTLEMENT DAY: ...... 111
SETTLEMENT FAILURE: ......................................................................................................... 111
BUYING BROKERS’ OBLIGATIONS ON RECEIPT OF PHYSICAL FORM SECURITIES: ....... 111
DOCUMENTS AND REGISTRATION: ...................................................................................... 113
SALES NOT CONDITIONAL ON TRANSFER: ......................................................................... 114
FRESH TRANSFER DEED ON REFUSAL BY COMPANY: ...................................................... 114
COMPANY IN LIQUIDATION:................................................................................................... 114
DISPUTE AFTER REGISTRATION: ......................................................................................... 114
SHORT SELLING: .................................................................................................................... 114
PROHIBITION ON BLANK SALES: .......................................................................................... 115
SHORT SALE PREREQUISITES: ............................................................................................ 115
CRITERIA FOR SECURITIES ELIGIBLE FOR SHORT SELLING: ........................................... 115
PROHIBITION: ......................................................................................................................... 115
TEMPORARY PROHIBITION ON SHORT SALE:..................................................................... 115
DISCIPLINARY ACTION ON NON-COMPLIANCES: ................................................................ 115
Chapter 11: FUTURES TRADING IN PROVISIONALLY LISTED COMPANIES ................................ 116
11.1.
11.2.
11.3.
11.4.
11.5.
TRADING & ELIGIBILITY CRITERIA: ....................................................................................... 116
DEPOSITS & MARGINS: .......................................................................................................... 116
RISK MANAGEMENT AND FINAL CLEARING & SETLEMENT: .............................................. 117
REFUSAL OF FORMAL LISTING: ............................................................................................ 117
BROKERS’ DEFAULT:.............................................................................................................. 117
Chapter 12: MARKET MAKERS REGULATIONS .............................................................................. 119
12.1.
12.2.
12.3.
12.4.
12.5.
12.6.
12.7.
12.8.
DEFINITIONS: .......................................................................................................................... 119
SELECTION OF DESIGNATED PRODUCTS FOR MARKET MAKING: ................................... 119
APPOINTMENT OF MARKET MAKER AND ANCILLARY MATTERS: ..................................... 119
MARKET MAKING AGREEMENT: ............................................................................................ 121
CIRCUIT BREAKERS AND MARKET HALTS: .......................................................................... 121
MAXIMUM SPREADS: .............................................................................................................. 121
MARKET MAKER’S ORDERS/QUOTES: ................................................................................. 121
FUNCTIONS AND OBLIGATIONS OF MARKET MAKER: ........................................................ 121
Chapter 13: DELIVERABLE FUTURES CONTRACT MARKET REGULATIONS ............................... 125
13.1.
13.2.
13.3.
13.4.
13.5.
13.6.
13.7.
13.8.
DEFINITIONS: .......................................................................................................................... 125
CONTRACT SPECIFICATIONS:............................................................................................... 125
ELIGIBILITY OF SECURITIES: ................................................................................................. 125
DELIVERABLE FUTURES CONTRACT TRADING: ................................................................. 125
BLANK SALE AND COMPLIANCE: .......................................................................................... 126
DEPOSITS & MARGINS: .......................................................................................................... 126
CLEARING & SETTLEMENT: ................................................................................................... 126
SUSPENSION OR DISCONTINUATION OF DELIVERABLE FUTURES CONTRACT
MARKET: .................................................................................................................................. 127
Chapter 14: CASH-SETTLED FUTURES CONTRACT MARKET REGULATIONS ............................ 129
14.1.
14.2.
DEFINITIONS: .......................................................................................................................... 129
TRADING: ................................................................................................................................. 129
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Karachi Stock Exchange Regulations
14.3.
CLEARING & SETTLEMENT: ................................................................................................... 130
Chapter 15: INDEX OPTION CONTRACTS MARKET REGULATIONS ............................................. 132
15.1.
15.2.
15.3.
DEFINITIONS: .......................................................................................................................... 132
TRADING: ................................................................................................................................. 132
CLEARING, SETTLEMENT AND RISK MANAGEMENT: ......................................................... 133
Chapter 16: EXCHANGE TRADED FUNDS (ETFs) REGULATIONS ................................................. 135
16.1.
16.2.
16.3.
16.4.
16.5.
16.6.
16.7.
DEFINITIONS: .......................................................................................................................... 135
LISTING PROCEDURE: ........................................................................................................... 135
TRADING, CLEARING & SETTLEMENT OF ETF UNITS: ........................................................ 135
DISCLOSURE OF INFORMATION: .......................................................................................... 136
OBLIGATIONS OF AP: ............................................................................................................. 136
APPLICABILITY OF LISTING REGULATIONS AND OTHER ALLIED MATTERS: ................... 136
LISTING AND ANNUAL FEE: ................................................................................................... 136
Chapter 17: STOCK INDEX FUTURES CONTRACT MARKET REGULATIONS................................ 143
17.1.
17.2.
17.3.
17.4.
17.5.
17.6.
DEFINITIONS: .......................................................................................................................... 143
TRADING: ................................................................................................................................. 143
CLEARING, SETTLEMENT AND RISK MANAGEMENT: ......................................................... 143
NETTING REGIME ON MtM LOSS COLLECTION AND PROFIT DISTRIBUTION
APPLICABLE TO SIF CONTRACT:…………………………………………………………………. 144
NETTING REGIME APPLICABLE TO 90 DAYS SIF CONTRACTS FOR DETERMINING THE
MARKET EXPOSURE: ............................................................................................................. 144
GENERAL: ................................................................................................................................ 144
Chapter 18: INVESTORS’ CLAIMS,BROKERS’ DISPUTES AND ARBITRATION REGULATIONS. . 146
18.1.
18.2.
18.3.
18.4.
18.5.
18.6.
18.7.
18.8.
18.9.
18.10.
18.11.
18.12.
18.13.
18.14.
18.15.
PERMANENT ARBITRATION PANEL: ..................................................................................... 146
DISPUTES TO BE REFERRED TO ARBITRATION: ................................................................ 146
APPLICATION FOR ARBITRATION: ........................................................................................ 146
ARBITRATION PROCEDURE: ................................................................................................. 146
LATE CLAIMS BARRED: .......................................................................................................... 148
APPEAL TO RAC:..................................................................................................................... 148
MEMBERS INVOLVED NOT TO HEAR THE CASE/ APPEAL: ................................................. 149
MISCELLANEOUS:................................................................................................................... 149
SUMMARY DISMISSAL AND EX PARTE DECISION: .............................................................. 149
SETTING ASIDE EX-PARTE AWARD: ..................................................................................... 149
EXTENSION OF TIME: ............................................................................................................. 149
PLACEMENT OF NAME OF DELINQUENT CLIENTS ON THE EXCHANGE WEBSITE: ........ 149
ADMINISTRATION OF OATHS TO THE PARTIES TO THE DISPUTE: ................................... 149
UNDERTAKING BY BOTH PARTIES TO THE DISPUTE/CLAIM: ............................................ 149
VERIFICATION OF INVESTORS’ CLAIMS, INSPECTION OF BOOKS & RECORDS AND
CONDUCTING OF ENQUIRY:.................................................................................................. 150
Chapter 19: RISK MANAGEMENT REGULATIONS ........................................................................... 151
19.1.
19.2.
19.3.
19.4.
19.5.
19.6.
19.7.
19.8.
OVERRIDING EFFECT:............................................................................................................ 151
DEFINITIONS AND METHODOLOGIES: .................................................................................. 151
BASE MINIMUM CAPITAL AND CAPITAL ADEQUACY: .......................................................... 153
EXPOSURE AND NETTING: .................................................................................................... 153
EXPOSURE MARGINS:............................................................................................................ 155
MARK-TO-MARKET LOSSES: ................................................................................................. 157
OTHER MARGINS: ................................................................................................................... 158
SOURCE AND UTILIZATION OF MARGINS AND MTM LOSSES: ........................................... 158
Karachi Stock Exchange Regulations
19.9. POSITION LIMITS: ................................................................................................................... 159
19.10. GENERAL:................................................................................................................................ 159
Chapter 20: DISCIPLINARY ACTIONS AGAINST TRE CERTIFICATE HOLDERS REGULATIONS. 170
20.1.
20.2.
20.3.
20.4.
20.5.
20.6.
20.7.
20.8.
20.9.
20.10.
20.11.
20.12.
20.13.
SUSPENSION, FORFEITURE OR CANCELLATION OF TRE CERTIFICATE AND
IMPOSITION OF FINES AND PENALTIES: .............................................................................. 170
PROCESS TO BE FOLLOWED FOR TAKING DISCIPLINARY ACTION UNDER
REGULATION 20.1.2: .............................................................................................................. 170
INVESTIGATION AND COMPLIANCE POWERS: .................................................................... 171
HEARING, IMPOSITION OF FINES AND APPEAL PROCEDURES: ........................................ 171
DISCIPLINARY ACTIONS IN RESPECT OF AUDIT ACTIVITIES: ............................................ 172
DISCIPLINARY ACTIONS IN RESPECT OF PROPRIETARY TRADING ACTIVITIES: ............ 172
DISCIPLINARY ACTIONS IN RESPECT OF TRADING SYSTEM ACTIVITIES: ....................... 172
DISCIPLINARY ACTIONS IN RESPECT OF MARKET MAKING ACTIVITIES: ......................... 173
DISCIPLINARY ACTIONS IN RESPECT OF SHORT/BLANK SELLING ACTIVITIES: ............. 173
CONSEQUENCES OF TRE CERTIFICATE HOLDER’S SUSPENSION/ CANCELLATION/
FORFEITURE OF TRE CERTIFICATE: .................................................................................... 174
DISPOSAL OF ASSETS COMPRISING BASE MINIMUM CAPITAL AND PROCEEDS OF
SHARES OF EXCHANGE HELD IN THE BLOCKED ACCOUNT THEREOF: .......................... 174
VERIFICATION OF INVESTORS’ CLAIMS, INSPECTION OF BOOKS & RECORDS AND
CONDUCTING OF ENQUIRY:.................................................................................................. 175
RESTORATION OF TRE CERTIFICATE: ................................................................................. 175
Chapter 21: DEFAULT MANAGEMENT IN RESPECT OF TRE CERTIFICATE HOLDERS/
BROKERS REGULATIONS ................................................................................................................. 176
21.1.
21.2.
21.3.
21.4.
21.5.
21.6.
21.7.
21.8.
21.9.
21.10.
21.11.
21.12.
21.13.
DEFINITIONS: .......................................................................................................................... 176
SUSPENSION ON ACCOUNT OF SETTLEMENT FAILURE OR FAILURE TO PAY OTHER
AMOUNTS ................................................................................................................................. 176
CLOSING OUT OF UNSETTLED AND OPEN POSITIONS: ..................................................... 176
DECLARATION AS DEFAULTER: ............................................................................................ 177
CONSEQUENCES OF DEFAULT: ............................................................................................ 177
FUNCTIONS OF THE DEFAULT COMMITTEE: ....................................................................... 177
CONTRIBUTION FROM CLEARING HOUSE PROTECTION FUND AND INVESTORS’
PROTECTION
FUND:....................................................................................................................................... 178
SETTLEMENT OF CLAIMS: ..................................................................................................... 178
ALLOCATION OF LOSSES: ..................................................................................................... 179
BUSINESS WITH DEFAULTER FORBIDDEN: ......................................................................... 179
RE-ADMISSION OF A DEFAULTER: ....................................................................................... 179
CONFLICT RESOLUTION: ....................................................................................................... 179
OVERRIDING EFFECT: ........................................................................................................... 179
Chapter 22: BROKERS’ OFFICE/BRANCH OFFICE REGULATIONS ............................................... 180
22.1.
22.2.
22.3.
22.4.
22.5.
22.6.
22.7.
22.8.
DEFINITIONS: .......................................................................................................................... 180
PROCEDURE FOR OPENING OF OFFICE/BRANCH OFFICE: ............................................... 180
ELIGIBILITY FOR THE PERSON APPOINTED AS A MANAGER OF THE BROKER’s
OFFICE/BRANCH OFFICE: ...................................................................................................... 181
GRANT OF CERTIFICATE OF REGISTRATION: ..................................................................... 181
OBLIGATIONS OF A BROKER OPENING OFFICE/BRANCH: ................................................. 181
OFFICE(S)/BRANCH OFFICE(S) OF A CORPORATE BROKERAGE HOUSE: ....................... 181
SUSPENSION, CANCELLATION OF REGISTRATION ETC. BY THE EXCHANGE: ................ 181
SUSPENSION OR CLOSURE OF OFFICE(S)/BRANCH OFFICE(S) BY THE BROKERS: ...... 182
Chapter 23: SYSTEM AUDIT [REGULATORY COMPLIANCE] REGULATIONS .............................. 187
Karachi Stock Exchange Regulations
23.1.
23.2.
23.3.
23.4.
23.5.
23.6.
23.7.
23.8.
23.9.
DEFINITIONS: .......................................................................................................................... 187
PANEL OF AUDITORS: ............................................................................................................ 187
ELIGIBILITY FOR AUDIT: ......................................................................................................... 187
SELECTION OF BROKERS: .................................................................................................... 187
SCOPE OF AUDIT: ................................................................................................................... 187
AUDIT PERIOD:........................................................................................................................ 187
AUDIT PROCESS AND STATUS OF COMPLIANCES: ............................................................ 188
COSTS: .................................................................................................................................... 188
SPECIAL AUDITS/INVESTIGATIONS: ..................................................................................... 188
Chapter 24: INVESTORS’ PROTECTION FUND (IPF) REGULATIONS ............................................. 193
24.1.
24.2.
24.3.
24.4.
24.5.
DEFINITIONS: .......................................................................................................................... 193
ESTABLISHMENT OF FUND:................................................................................................... 193
ELIGIBILITY OF CLAIMS: ......................................................................................................... 193
PROCEDURE FOR SETTLEMENT OF CLAIMS: ..................................................................... 193
MANAGEMENT OF THE FUND: ............................................................................................... 193
Karachi Stock Exchange Regulations
Chapter 1:
1.1.
PREAMBLE, SHORT TITLE AND COMMENCEMENT
PREAMBLE:
Karachi Stock Exchange Limited, in exercise of its powers conferred under Section 34 of the Securities & Exchange
Ordinance, 1969 (XVII of 1969), and with the prior approval of the Securities and Exchange Commission of Pakistan,
hereby makes these Regulations.
1.2.
SHORT TITLE:
These Regulations shall be known as Karachi Stock Exchange Limited Regulations (hereinafter referred as “KSE
Regulations”).
1.3.
COMMENCEMENT:
These Regulations shall come into force on the day of their publication in the official gazette of Pakistan.
1.4.
POWERS TO RELAX REGULATORY REQUIREMENT(S):
The Securities and Exchange Commission of Pakistan may, upon its own motion, or on a request of the Karachi Stock
Exchange, relax the operation of any requirement of KSE Regulations for a person or a class of persons in exceptional
circumstances and for reasons to be recorded in the Securities and Exchange Commission of Pakistan.
Page 1 of 192
Karachi Stock Exchange Regulations
Chapter 2:
2.1.
INTERPRETATION AND DEFINITIONS
GENERAL PRINCIPLES OF INTERPRETATION:
In these Regulations, unless the context otherwise requires:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
2.2.
A reference to any legislation or legislative provision includes any statutory modification or re-enactment of, or
legislative provision substituted for, and any subordinate legislation under that legislative provision;
The singular includes the plural and vice versa;
A reference to an individual or a person includes, an individual, a company, corporation, firm, association of persons,
trust, authority or government, any entity as the context admits or requires and vice versa;
unless there is anything repugnant in the subject or context, words importing the “masculine gender” shall include the
“feminine gender / corporate entities;
A reference to a recital, article, schedule or annexure is to a recital, article, schedule or annexure of or to these
Regulations;
A recital, schedule or annexure forms part of these Regulations unless otherwise provided;
A reference to any agreement or document is to that agreement or document (and, where applicable, any of its
provisions) as amended, notated, restated or replaced from time to time;
Where an expression is defined, another part of speech or grammatical form of that expression has a corresponding
meaning;
A reference to a matter being “to the knowledge” of a person means that the matter is to the best of the knowledge and
belief of that person after making reasonable inquiries in the circumstances;
The capitalized terms used in these Regulations shall have the same meaning as given to them in these Regulations.
However, if a term has not been so defined in these Regulations then it shall have the same meaning as has been
defined in the Companies Ordinance, 1984, Securities and Exchange Ordinance, 1969, Stock Exchanges
(Corporatization, Demutualization & Integration) Act, 2012 or any Rules or Regulations made thereunder or other
applicable law for the time being in force;
The headings in these Regulations are for convenience only and do not affect interpretation of any provisions of these
Regulations;
A construction that furthers the object or purpose of any of the provisions of these Regulations shall be preferred over
any other construction of such provisions;
A reference to any power of the Exchange shall include the Board or any officer or the Committee of the Exchange so
delegated by the Board;
Gregorian calendar shall be used whenever counting days, months or years mentioned in these Regulations;
The term ‘days’ shall mean working/business days when the Exchange is open for business in Pakistan;
The terms and phrases used herein without a specific definition shall have the meaning in accordance with current
trade practice;
All existing Regulations of the Exchange except the Regulations Governing Over The Counter (OTC) Market of the
Karachi Stock Exchange Limited shall stand repealed. However, repeal of such regulations shall not affect any act or
omission committed under such regulations when they were in force. Any circular, notification, order or exemption
issued, made or granted under the repealed Regulations shall have effect as if had been issued, made or granted
under the corresponding provision of these Regulations. Any official appointed and anybody elected or constituted
under any repealed Regulations shall continue and shall be deemed to have been appointed, elected or constituted, as
the case may be, under the corresponding provision of these Regulations. Any document referring to any Regulation
hereby repealed shall be construed as referring, as far as may be, to these Regulations, or to the corresponding
provision of these Regulations;
Where any communication, decision, agreement, arrangement or contract is not in conformity with these Regulations,
then KSE Regulations shall take precedence;
Where any provision of KSE Regulations contradicts any provisions of the SECP Rules/ Regulations for the time being
in force, such SECP Rules/Regulations shall take precedence.
APPLICABILITY:
Unless provided otherwise, these Regulations shall apply to the Board of Directors, all employees, Brokers and their clients,
constituents and Agents, TRE Certificate Holders, shareholders, issuers/offerors, listed companies and general public
dealing with the Exchange in any manner and capacity.
2.3.
SEVERABILITY:
If any provision of these Regulations is held by any court, tribunal or other regulatory authority to be unenforceable or
contrary to any law, rules, regulations, circulars, notifications, judicial decision etc. then such provision shall be deemed to
be severed from these Regulations, however, it shall not affect the enforceability or validity of the remaining provisions of
these Regulations which shall continue to be in force and apply.
2.4.
GENERAL DEFINITIONS:
In these Regulations, unless there is anything repugnant in the subject or context:
Page 2 of 192
Karachi Stock Exchange Regulations
i.
Act
means the Stock Exchanges (Corporatization, Demutualization and Integration)
Act, 2012;
means a person appointed by a Broker to act on his behalf for the purposes
recognized by the Exchange and registered with the Commission under the Brokers
and Agents Registration Rules, 2001;
means the different markets provided by the Exchange and are governed under
these Regulations which include Ready Delivery Contract Market which includes
ODD Lots market, Deliverable Futures Contract Market, Cash-Settled Futures
Contract Market, Stock Indices Futures Contract Market, Futures Trading in
Provisionally Listed Companies Market, Index Options Market, Debt Securities
Market and any other market which the Board may provide for with the prior
approval of the Commission and individually referred to as a “Market”;
ii.
Agent or
Accredited Agent
iii.
All Markets
iv.
Articles
means the Articles of Association of the Exchange;
v.
Asset
Management
Company (AMC)
shall have the same meaning as ascribed thereto under the Non-Banking Finance
Companies and Notified Entities Regulations, 2008;
vi.
Authorized
Participant (AP)
vii.
Authorized
Participant
Agreement (APA)
viii.
Base Minimum
Capital (BMC)
means a Market Maker as defined under chapter 12 of these Regulations,
appointed by the AMC under the Authorized Participant Agreement and obligations
and responsibilities of whom are also specified in the Constitutive Documents;
means an agreement entered into between the Authorized Participant, Trustee and
the Asset Management Company setting out the roles and responsibilities of each
party and includes, among other things, the terms and procedures to be adopted by
the AMC and AP for the issuance and redemption of creation units. Minimum
contents of the Authorized Participant Agreement are specified in Annexure-A
attached to chapter 16 relating to ETFs of these Regulations;
means the collateral deposited and/ or maintained by the Broker with the Exchange
for its eligibility to trade through the Exchange Trading Systems to be calculated/
prescribed as per Schedule-I annexed to chapter 19 of KSE Regulations;
means a sale by a Broker on his proprietary account or on client’s account when
the Broker or client does not own shares or the sale does not constitute a sale with
pre-existing interest or is a sale without entering into a Securities Lending and
Borrowing Contract to meet delivery requirements on settlement date;
means a CDC account opened and maintained by the Exchange in accordance
with clause (c) of sub-section (1) of section 5 of the Act;
ix.
Blank Sale
x.
Blocked Account
xi.
Board
means the Board of Directors of the Exchange;
xii.
Book Entry
Security
xiii.
Broker
shall have the same meaning as ascribed thereto in the Central Depository Act,
1997 and the CDC Regulations made thereunder;
means a TRE Certificate Holder of the Exchange engaged in the business of
executing transactions in Securities for his own account or on account of his clients
and is registered with the Commission as a Broker under the Brokers and Agents
Registration Rules, 2001;
xiv.
Broker Clearing
Member (BCM)
xv.
CDC
xvi.
CDC Regulations
xvii.
CDS
means the Central Depository Systems established and operated by the CDC;
xviii.
Central
Depository
shall have the same meaning as ascribed thereto under the Securities and
Exchange Ordinance, 1969 (XVII of 1969);
means the Clearing House Protection Fund of the Exchange governed and
operated by the Trustees of CHPF Trust under its Trust Deed and regulations, if
any;
shall have the same meaning as ascribed thereto in the NCCPL Regulations 2003;
means the Central Depository Company of Pakistan Limited and its successors in
interest;
means Central Depositary Company of Pakistan Limited Regulations for the time
being in force;
xix.
CHPF
xx.
Clearing Day
means the clearing day fixed by the Exchange from time to time;
xxi.
Clearing House
means the Clearing House established and operated by the Exchange;
xxii.
Closing Price
means the price determined as per methodology prescribed under chapter 19 of
KSE Regulations;
xxiii.
Commission
means the Securities and Exchange Commission of Pakistan;
Connected
Person
means in relation to a natural person, a spouse, real, step or half sibling, lineal
ascendant or descendant of such person, a partner, promoter or substantial
shareholder of an undertaking, company or body corporate of which such person is
also a partner, promoter, substantial shareholder or any undertaking, company or
body corporate in which such person is a partner, promoter, substantial shareholder
or director, in relation to a legal person a Connected Person means an undertaking,
xxiv.
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Karachi Stock Exchange Regulations
xxv.
Contract
xxvi.
Corporate
Brokerage House
xxvii.
Corporatization
xxviii.
CRO
xxix.
Cross Trade
xxx.
Debt Securities or
Debt Market
Securities
xxxi.
Defaulter
xxxii.
xxxiii.
Demutualization
Regulations
Derivative
Contracts
xxxiv.
Downtick
xxxv.
ETF
xxxvi.
ETF Unit
xxxvii.
Exchange
xxxviii.
Exchange Trading
Systems or
Trading Systems
xxxix.
Exposure
company or body corporate which is a holding, subsidiary or associated company
of such legal person;
means standardized contract eligible for trading as a single or multiple thereof in
the respective Markets on the terms and conditions defined under the relevant
chapters of these Regulations as amended from time to time;
means the TRE Certificate Holder being a private or a public company incorporated
under the Ordinance and registered as a Broker with the Commission;
means the conversion of the Exchange from a company limited by guarantee to a
company limited by shares;
means Chief Regulatory Officer of the Exchange;
means the trade executed either between the two clients of the same Broker or a
client and his Broker’s proprietary account through the Trading Systems;
Include Corporate Debt Securities such as Term Finance Certificates (TFCs),
SUKUK Certificates Sharia Compliant Bonds, Registered Bonds, Corporate Bonds,
Commercial Papers, Participation Term Certificates (PTCs), collateralized
Securities and all kinds of debt instruments issued by any Pakistani or foreign
company or corporation registered in Pakistan;
means a TRE Certificate Holder declared as a defaulter by the Exchange
under chapter 21 of these Regulations;
means Stock Exchanges (Corporatisation, Demutualization and Integration)
Regulations, 2012 framed by the Commission under Section 23 of the Act;
means Deliverable Futures Contract, Cash Settled Futures Contract, Stock Index
Futures Contract and Index Options Contract;
means the price of a security below the last executed price of that security
transacted through the Exchange Trading System;
means Exchange Traded Fund, which is a listed index-tracking open-ended fund
structured as a Collective Investment Scheme. The primary objective of the ETF is
to mimic the return of a particular benchmark index by investing substantially all of
its assets in the constitution securities of the Benchmark Index. ETF issues and
redeems creation units in kind through APs only;
means a unit of open-ended scheme that tracks a benchmark index and is listed on
the stock exchange and may be traded like any other share on the stock exchange;
means the Karachi Stock Exchange Limited including, where the context so
permits, Board, any committee, sub-committee, employee or officer to whom any
function of the Karachi Stock Exchange may for the time delegated;
means the Karachi Automated Trading System (KATS), Bonds Automated Trading
System (BATS) and any other electronic trading system established from time to
time which also include its allied computer applications and software established by
the Exchange from time to time;
means at any point in time, security-wise and client-wise cumulative net unsettled
amount of purchases and sales, of a Broker (including proprietary trades) under
each Markets determined in accordance with chapter 19 of KSE Regulations;
means the number of ordinary shares readily available for trading through the
Exchange which comprises of all outstanding ordinary shares excluding the shares
held by the following categories/persons:
(a) For Book-entry Security:
xl.
Free-Float
(i)
Government holdings;
(ii)
Directors and sponsors;
(iii)
In physical form;
(iv)
Associate companies;
(v)
Employee Share Schemes and not available for trading by employees;
(vi) Strategic investors or any other category that are barred from selling at the
review date.
(b) For physical form Security:
Free-Float may be all physical shares excluding those issued to the
Government, directors, sponsors, associate companies, employees under
Employee Shares Schemes and not available for trading by employees and
strategic investors, who are barred from selling at the review date.
Free-Float of each Security allowed for trading shall be reviewed every six
months and shall be disclosed to the public. However, in case of disinvestment
by sponsors or public, Free-Float may be reviewed earlier by the Exchange;
Page 4 of 192
Karachi Stock Exchange Regulations
xli.
Futures Trading in
Provisionally
Listed Companies
Market
xlii.
House Account
xliii.
Initial Shareholder
xliv.
Initial TRE
Certificate Holder
xlv.
Investor
xlvi.
IPF
xlvia.
Issuer
xlvii.
KSE Shareholder
xlviii.
Leveraged Market
xlix.
Listed Company
l.
Mark-to-Market
Loss or MtM Loss
li.
Mark-to-Market
Profit or MtM
Profit
means a market as envisaged under chapter 11 of these Regulations;
means the house account as defined and prescribed under the CDC Regulations
as amended from time to time;
means the legal owner of the shares of the Exchange on the date of
Corporatization, as defined under the Act;
means any person who has been issued a TRE Certificate under section 5(1) (e) of
the Act;
means a person trading in the Securities on the Exchange Trading Systems
through a Broker under the terms and conditions specified in these Regulations;
means the Investors Protection Fund of the Exchange governed and operated by
the Trustees of IPF Trust under its Trust Deed and these Regulations;
shall mean a public limited Company or a body corporate that has issued or intends
to issue securities to the General Public under section 57 or 120 of the Ordinance;
means the legal owner of the shares of the Exchange at any time;
means the market for offering any of the Leverage Market Contracts as defined
under the Securities (Leveraged Markets and Pledging) Rules, 2011;
means a company or a body corporate whose securities are listed at the Exchange
and include a provisionally listed company under these Regulations;
means an amount payable by a Broker at any point in time during a trading day on
account of trades executed on behalf of its clients, as well as its proprietary
unsettled position in any security, to the Clearing House or NCCPL due to the
difference between the Transaction Price, on trade to trade basis, of the unsettled
position in each security and the Closing Price of that security.
In the case of Index Options Contracts, Mark to Market Loss shall mean an amount
payable by a Broker at any point in time during a trading day on account of
unsettled short positions of its clients, as well as its proprietary unsettled short
positions in Options Contracts as Option Writer and/or Option Seller, due to the
difference between the Exercise Price of the Option Contract and the
corresponding Daily Settlement Price determined in accordance with the
Regulations Governing Index Options Contracts;
means amount receivable by a Broker at the end of each day on account of
contracts executed on behalf of its clients, as well as its proprietary unsettled
position in any security, from Clearing House or NCCPL due to the difference
between Transaction Price, on trade to trade basis, of the unsettled position in each
security and the Daily Settlement Price of that Security.
In the case of Index Options Contracts, Mark to Mark Profit shall mean an amount
receivable by a Broker at any point in time during a trading day on account of
Option Contracts purchased on behalf of its clients, as well as its proprietary buy
positions in the Option Contracts as an Option holder/ buyer, due to the difference
between the Exercise Price of the Option Contract and the corresponding Daily
Settlement Price determined in accordance with these Regulations governing Index
Option Contracts;
lii.
NCCPL
means the National Clearing Company of Pakistan Limited;
liii.
NCCPL
Regulations
liv.
NCSS
lv.
Negotiated Deal
means the Regulations framed by NCCPL from time to time with regard to its
functions and operations of NCSS;
means the National Clearing and Settlement System of the NCCPL established and
operated by NCCPL under NCCPL Regulations and NCSS Procedures made
thereunder;
means a deal which has been negotiated between two parties outside the
Exchange Trading Systems and reported through the interface provided by the
Exchange, which may also be called as an Off Market Transaction;
lvi.
Non-Broker
Clearing Member
shall have the same meaning as ascribed thereto in the NCCPL Regulations;
lvii.
Ordinance
means the Companies Ordinance, 1984 (XLVII of 1984);
lviii.
PMEX
means the Pakistan Mercantile Exchange Limited;
Prescribed
means as prescribed under these Regulations or any authority thereof;
Provisionally
Listed Company
Ready Delivery
Contract Market
means companies whose shares are provisionally listed on the Exchange under
these Regulations subject to the final clearance by the Exchange;
lix.
lx.
lxi.
means a market where Ready Delivery Contracts are traded;
Page 5 of 192
Karachi Stock Exchange Regulations
lxii.
Ready Delivery
Contract or Ready
Market Contract
means trade/ transaction in a Security executed between a buyer and a seller in the
Ready Delivery Contract Market or Odd Lots Market established under these
Regulations and ready for settlement either on T+1 or T+2 Settlement Day as
specified by the Exchange and shall not include Derivative Contracts;
lxiii.
Regulatory Affairs
Committee (RAC)
means a committee constituted by the Board with prior approval of the
Commission;
lxiv.
Regulatory Affairs
Department (RAD)
means a department/division of the Exchange dealing with the regulatory functions
of the Exchanges;
lxv.
SECP Rules/
Regulations
means and include all the regulations, notifications, SROs and circulars issued by
the Commission from time to time;
lxvi.
Securities
Ordinance
means the Securities & Exchange Ordinance,1969 (XVII of 1969);
lxvii.
Securities Rules
means the rules framed under the Securities Ordinance by the Commission;
lxviii.
Listed Security
includes any security as defined under the Securities Ordinance and which is
accepted for listing on the Exchange in accordance with these Regulations;
means a sale by a Broker, on his Proprietary Account or on Client’s Account, not
owning securities at the time of sale or the sale without constituting a Pre-Existing
Interest, but having SLB Contract executed through SLB Market at NCCPL in
accordance with its Regulations / Procedures to meet delivery requirements on the
settlement date;
means Stock Index Futures Contract executed through the Trading Systems of the
Exchange;
means the Securities Lending and Borrowing Contract executed through NCSS as
ascribed thereto in the NCCPL Regulations;
shall have the same meaning as ascribed thereto in the NCCPL Regulations in
respect of SLB Market;
lxix.
Short Sale
lxx.
SIFC
lxxi.
SLB Contract
lxxii.
SLB Market
lxxiii.
SLB Transactions
have the same meaning as provided under the NCCPL Regulations;
lxxiv.
Stock Exchange
means a stock exchange registered under the Securities Ordinance;
lxxv.
Stock Index
Futures Contract
lxxvi.
Sub-Account
lxxvii.
T+2 or T+1
lxxviii.
Theoretical Price
means, a derivative contract executed through the Exchange Trading System
subject to these Regulations;
means a sub -account as defined under the CDC Regulations, as amended from
time to time;
means the abbreviations that refer to the settlement date of Security transactions,
where T stands for trade or transaction day on which it takes place. The numbers 1
and 2 denote the number of days after the transaction day at which the settlement
will take place;
means the Closing Price of a Security for Deliverable Futures Contract and/or
Cash-Settled Futures Contracts Markets, if there is no trading in such Security in
the respective Market during whole trading day, to be determined as per
methodology prescribed under chapter 19 of KSE Regulations;
means the minimum price increase or decrease at which trades can be made on
the Trading System;
means a Trading Right Entitlement Certificate issued by the Exchange including the
certificate issued to the existing members on the date of corporatization; evidencing
right of the TRE Certificate Holder to apply for registration as a Broker in
accordance with the Brokers and Agents Registration Rules, 2001 as amended
from time to time;
means any person who is issued a TRE Certificate by the Exchange upon
Corporatization under Section 5 of the Act, or purchases or acquires such TRE
Certificate under Section 16 of the Act or is issued a fresh TRE Certificate in
accordance with the provisions of the Act;
means the eligibility criteria for selection of eligible securities for trading in the
different trading segments as prescribed by the Exchange duly approved by the
Commission;
lxxix.
Tick Size
lxxx.
TRE Certificate
lxxxi.
TRE Certificate
Holder
lxxxii.
Uniform Criteria
lxxxiii.
Unique
Identification
Number (UIN)
lxxxiv.
Uptick
lxxxv.
Zero Tick
lxxxvi.
Zero-Plus Tick
shall have the same meaning as ascribed thereto in the NCCPL Regulations;
means the price of a Security above the last executed price of that Security
transacted through the Exchange Trading System;
means the price of a Security without any difference from the last executed price of
that Security transacted through the Exchange Trading System;
means the price without any difference in the previous price of a transaction of a
Security, which was an Uptick, executed through the Trading System.
Page 6 of 192
Karachi Stock Exchange Regulations
Chapter 3:
3.1.
KARACHI STOCK EXCHANGE LIMITED
FIT & PROPER CRITERIA FOR DIRECTORS OF THE EXCHANGE:
3.1.1. Any person desiring to act as a Director on the Board or who is nominated as a member of any committee constituted by
the Exchange or the Board shall be required to fulfill the “Fit & Proper Criteria”, details of which are specified in Annexure3A to this chapter. The decision of the Exchange in this regard shall be final and binding on the person desiring to become
a Director on the Board.
3.2.
CONFLICT OF INTEREST:
3.2.1. It is the responsibility of each Director to act in the best interests of Capital Market and Investors and to refrain from any
conduct that may be considered to be adverse or contrary to capital market and interests of Investors.
3.2.2. Each Director should disclose to the Board before a Board meeting, any conflict of interest with respect to any item forming
part of agenda of such meeting.
3.2.3. Director should not participate in any deliberation, decision making, proceeding, investigation or disciplinary action by the
Exchange in the case of a conflict of interest.
Explanation: A "conflict of interest" exists when a Director's private interest is inconsistent with or opposed to, or gives the
appearance of being inconsistent with or opposed to, capital market and Investors interests. Such conflicts of interest may
arise not only as a result of a direct personal interest, but also indirectly as a result of the personal interests of a member of
his family or organizations affiliated with the Director.
3.3.
POWERS OF THE EXCHANGE:
3.3.1. The Exchange shall have such powers as are conferred on it by or under:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
The Ordinance;
The Securities Ordinance and Securities Rules made thereunder;
The Demutualization Act and Demutualization Regulations made thereunder;
The Memorandum and Articles of Associations of Exchange;
KSE Regulations;
The decisions, notices, guidelines, clarifications and circulars issued by the Commission from time to time; or
Any other law for the time being in force.
3.3.2. Unless the contrary intention appears, powers conferred on the Exchange by or under KSE Regulations shall be exercised
in such manner as the Board may from time to time prescribe in this behalf.
The Exchange shall have the power to implement and amend KSE Regulations subject to prior approval from the
Commission.
3.4.
DEPOSIT, FEE, CONTRIBUTION AND OTHER SUMS:
3.4.1. In consideration for the facilities and services provided by the Exchange; the TRE Certificate Holders, listed companies and
other person shall pay the deposits, fee, contribution and other sums specified by the Exchange in the deposits, fee,
contribution and other sums Schedule with the approval of the Commission from time to time. The said schedule shall also
stipulate the minimum basic deposits required to be deposited by the Brokers for each trading segment, fee, contribution
and other sums payable and the time by which, or period within which, the Deposits, Fee, Contributions and other Sums
should be paid.
3.4.2. Such deposits may be utilized by the Exchange for any purpose whatsoever and shall be refundable (if any) by the
Exchange upon deactivation of admission to the relevant trading segment. However, the refund shall be made after making
deductions on account of fee, contributions, fine, penalties and other sums payable by the deactivating TRE Certificate
Holder under or pursuant to KSE Regulations or losses, damages, costs and expenses suffered or incurred by the
Exchange due to failure of the deactivating TRE Certificate Holder to comply with KSE Regulations during the period of its
admission to the Exchange Trading Systems.
3.4.3. The Exchange shall notify the concerned TRE Certificate Holders any change in respect of deposits, fees, contribution and
other sums prior to its implementation.
3.5.
DESIGNATED TIME SCHEDULE:
3.5.1. The Exchange shall notify to all the concerned the designated time schedule in relation to trading and other support system
services in accordance with KSE Regulations.
3.5.2. The Exchange shall promptly notify all the concerned of any changes to the designated time schedule prior to its
implementation.
3.5.3. In case a meeting of the Board is not possible to be held to take decision with regard to extending or curtailing the
designated time for any activity defined in the designated times schedule, the Managing Director of the Exchange may take
such interim decision. However, such decision will be placed before the Board for ratification in its immediate next meeting.
3.6.
HOURS OF OPERATION:
Page 7 of 192
Karachi Stock Exchange Regulations
Normal hours of operation of the Exchange for trading through Trading Systems shall be notified by the Exchange with the
approval of the Board from time to time.
3.7.
DISSEMINATION OF RELATED INFORMATION BY THE EXCHANGE TO OTHER MARKET ENTITIES:
3.7.1. The Exchange shall disseminate the appropriate information to the CDC, NCCPL, all other Stock Exchanges, the PMEX
and the Commission; relating to voluntary switching off of the trading terminals upon the request of Broker, suspension,
cancellation, forfeiture of TRE Certificate, declaration of default, non-renewal or cancellation of registration as a Broker by
the Commission, suspension of any or all of the privileges of TRE Certificate Holder including restriction and/or suspension
of trading terminals or any similar penal action(s) taken against such TRE Certificate Holder by the Exchange under KSE
Regulations for taking required actions, if any, at their end. The Exchange shall also place such information on its website
for the general public preferably on the same day on which such action is taken, but not later than the time of opening of
market on the next trading day.
Provided that prior to issuance of notice for deactivation of a TRE Certificate Holder as a Broker, the Exchange shall ensure
that no settlement is pending against such Broker.
Furthermore, the Exchange shall also immediately publish public notice(s) regarding cancellation or forfeiture of TRE
Certificate and declaration of default against such Broker in widely circulated newspapers of Pakistan in Urdu and English
languages.
3.7.2. For the purpose of effective and timely implementation of above actions, the Exchange in case of restriction on trading
terminals for closing-out the open outstanding positions of a Broker shall specify and inform to the CDC and NCCPL about
the actions which are required to be taken by them against such Broker.
3.7.3. Where the cause of suspension or restriction of complete trading terminals or trading rights of a Broker/TRE Certificate
Holder is removed to the satisfaction of the Exchange, the Exchange shall give its consent to the CDC and NCCPL for
restoration of their respective services offered to such Broker/ TRE Certificate Holder.
3.7.4. On the request of Broker, the Exchange may allow reactivation of Trading Systems of a Broker deactivated due to the
following reasons within 10 business days:
(a) Failure to submit capital adequacy certificate within the stipulated time; provided that the Broker has submitted the
capital adequacy certificate to the Exchange; or
(b) On request of Broker for closure of its business activities for a certain period.
However, this time period can be reduced, if such Broker provides cogent reasons to the satisfaction of the Exchange
for earlier reactivation of Trading Systems.
3.8.
SHARING OF INFORMATION AMONGST THE COMMISSION, EXCHANGE, CDC AND NCCPL:
3.8.1. In case of suspension, cancellation or forfeiture of TRE Certificate, default of Broker or expiry of Broker registration, the
Exchange may request the Commission, CDC, NCCPL or other Exchanges to provide any relevant requisite information.
3.8.2. The Exchange, CDC and NCCPL under intimation to the Commission, shall update themselves, biannually, about the latest
status of their Brokers, Broker Participants and Clearing Brokers.
3.9.
EXCHANGE’S POWER TO TAKE CONSEQUENTIAL ACTIONS AGAINST A UIN ON ITS NON-COMLIANCE WITH
NCCPL REGULATIONS:
3.9.1. NON OR PARTIAL PAYMENT OF CAPITAL GAIN TAX (CGT) BY A TRE CERTIFICATE HOLDER ON ITS OWN OR
CLIENTS’ BEHALF TO NCCPL UNDER NCCPL REGULATIONS:
In case NCCPL notifies to the Exchange regarding restriction of a UIN due to default on payment of CGT, either fully or
partially, the Exchange shall restrict such UIN from taking new position in any Market. However, squaring-up of open
position(s) shall be allowed for such restricted UIN.
However, upon removal of cause of action against such UIN by NCCPL and receipt of notice from NCCPL in this regard,
the Exchange shall remove restriction imposed on such UIN.
3.9.2. FAILURE TO DEPOSIT MARK-TO-MARKET LOSSES AND/OR OTHER APPLICABLE MARGINS IN MARGIN TRADING
SYSTEM (MTS):
In case NCCPL notifies to the Exchange regarding suspension of a UIN, acting as financee in the MTS, due to default on
payment of Mark-to-Market Losses and/or other applicable margins in MTS within stipulated time, the Exchange shall
restrict such UIN from taking new position in any market.
However, upon removal of cause of action against such UIN by NCCPL and receipt of notice from NCCPL in this regard,
the Exchange shall remove restriction imposed on such UIN.
3.10. EXCHANGE’S POWER TO IMPOSE RESTRICTIONS ON A BROKER CONSEQUENT UPON IMPOSITION OF
RESTRICTIONS ON SUCH BROKER BY CDC AS ITS PARTICIPANT:
3.10.1. In case CDC notifies to the Exchange regarding imposition of restriction on a Broker as its participant due to breach of its
regulations concerning the Custody Position, as defined in CDC Regulations, or any other provision of CDC Regulations,
the Exchange shall take consequential restrictive actions against such Broker in line with the restrictions imposed under
CDC Regulations.
Page 8 of 192
Karachi Stock Exchange Regulations
3.10.2. Upon removal of restriction on such Broker by CDC and receipt of notice from CDC in this regard, the Exchange shall
remove consequential restriction imposed on such Broker
.
3.11. EXCHANGE’S POWER TO SUSPEND A BROKER CONSEQUENT UPON ITS SUSPENSION BY CDC AS ITS
PARTICIPANT:
3.11.1. In case CDC notifies to the Exchange regarding suspension of a Broker as its Participant due to its non-compliance with its
regulations concerning the Custody Position or any other provision of CDC Regulations, the Exchange shall also suspend
such Broker.
3.11.2. Upon removal of suspension of Broker by CDC and receipt of notice from CDC in this regard, the Exchange shall remove
suspension of such Broker.
Page 9 of 192
Karachi Stock Exchange Regulations
Annexure-3A
FIT & PROPER CRITERIA FOR DIRECTORS
Eligibility of any person desiring to act as a Director on the Board of Directors of the Exchange, including any person who is by
virtue of his office a Director on the Board of Directors, and any person nominated as a member of a committee constituted by the
Exchange or Board shall be judged on the basis of the following criteria, which shall be in addition to meeting requirements
stipulated under the Companies Ordinance, 1984 relating to eligibility of a director:
(a)
Integrity, Honesty and Reputation:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(b)
Experience, Qualification and Management:
(i)
(ii)
(iii)
(c)
He has management/business experience of at least 5 years at senior management position.
He has at least three years’ experience in the field of capital markets, banking, mutual fund industry, financial
services, corporate sector or any other field ancillary to the capital markets.
He holds professional qualification and/or at least graduation from a university duly recognized by the Higher
Education Commission of Pakistan or foreign qualification of equivalent level.
Where a person possesses 15 years of experience and knowledge of the capital markets, depositories, commodities
market, or in the areas relating to corporate governance, law, information technology, banking, business and
industrial concerns or other closely related discipline, the minimum qualification requirement may be relaxed on case
to case basis by the Exchange, under intimation to the Commission.
Provided that in case of Directors to be appointed by the Commission, such relaxation may be granted only by the
Commission.
Solvency and Financial Integrity:
(i)
(ii)
(iii)
(iv)
(v)
(d)
He has not been convicted in any criminal offence or directly involved in any settlement in civil/criminal proceedings
in a court of law, particularly with regard to investments, financial/business misconduct, fraud/forgery, breach of
trust, financial crime etc. and/or it has not been concluded by any regulatory authority that he has been associated
with any unauthorized financial activity including illegal brokerage business.
He is not a party in litigation against Commission in respect of any criminal offence or a matter relating to nonpayment of investor claims or in any other manner prejudicial to the interest of investors and general public.
TRE Certificate or registration of the person or any company in which he was a director during the last three years
has not been suspended/cancelled by the Commission, any other regulatory authority, any professional body,
association or any relevant entity i.e. the stock or commodity exchange, depository company or clearing company.
Provided that eligibility of a person may be considered on the basis of prior clearance obtained from any such
organization that suspended/cancelled the TRE Certificate or registration.
He has not been disqualified/removed from the post of Chief Executive, Chairman, Director, CFO or from any other
senior management position* of a company by the Commission or any other regulatory authority.
No investigation/enquiry, conducted under Section 29 of the Securities and Exchange Commission of Pakistan Act,
1997, Section 21 of the Securities and Exchange Ordinance, 1969, Section 263 or Section 265 of the Companies
Ordinance, 1984, has been concluded against him by the Commission, with any adverse findings, either in personal
capacity or as a director of a company during the past three years.
An order restraining, prohibiting or debarring him from dealing in securities in the capital market or from accessing
the capital market has not been passed; or penalty of Rs.500,000/- or more has not been imposed on him by the
Commission in the last three years, in respect of any laws administered by the Commission.
Provided that a person may be considered eligible in case a period of at least three years from the date of expiry of
the period specified in the order for which such person has been restrained/prohibited/debarred has elapsed.
He has not provided false or misleading information either to the Commission or to any of the relevant entities.
He has not been adjudged as insolvent or suspended payment of debts or has compounded with his creditors.
He has not been convicted by a court of competent jurisdiction as a defaulter in payment of any loan to a financial
institution including banking company, a Development Financial Institution or a Non-Banking Financial Institution.
No overdue payment is reflected against him in the latest CIB report. Provided that such person will be eligible if he
clears his name by settling his dues.
It has been established that he, in his individual capacity or as director of a company has not been in default of
payment of dues owed to any investor.
His name is borne on the Register of National Tax Payers.
Additional Criteria for Directors Appointed by the Commission:
(i)
(ii)
He has no relationship with the Exchange that would interfere in him exercising independent professional judgment
as a Director and he can be reasonably perceived as being able to exercise independent business judgment without
being subservient to any apparent form of interference.
He is not a Broker or a director, officer, sponsor or direct shareholder of any Broker of any stock exchange in
Pakistan.
Provided that his immediate family member** is also not a Broker or director, officer or sponsor of any Broker of any
stock exchange in Pakistan and/or the combined shareholding of the immediate family members** in any brokerage
house does not exceed twenty percent.
Page 10 of 192
Karachi Stock Exchange Regulations
Provided further that it shall be mandatory to disclose any such shareholding to the Exchange and the Commission
at the time of submission of the Form and Undertaking attached as Annexure 3A-1 and 3A-2 respectively.
He has no personal services contract(s) with the Exchange or is not currently serving as its employee and has not
been employed at any position of the Exchange within the past two years.
He is not simultaneously serving as a Director on the Board of more than seven listed companies.
He is not engaged by a listed company in an executive role related to investment in capital markets whether in the
capacity of director or otherwise.
(iii)
(iv)
(v)
*
Senior management position wherever referred to in these criteria includes:
a.
b.
c.
d.
e.
f.
g.
h.
**
Any executive, including the chief executive or any officer acting as second to chief executive officer including
chief operating officer or by whatever name called;
Chief financial officer, head of accounts or head of finance;
Head of internal audit;
Head of credit or risk management;
Head of operations;
Head of treasury or chief investment officer;
Head of law, company secretary or compliance officer; and
Any other position, by whatsoever name called, which may be construed as a senior management position.
Immediate family member wherever referred in these criteria means spouse, children and parents.
The Fit & Proper Criteria is perpetual in nature and the Exchange shall ensure compliance with the provisions of the Fit &
Proper Criteria.
All directors must inform the Exchange of any change in the submitted information that may potentially affect their status of
directorship, within 48 hours of knowledge of such change.
Any person desiring to act as a Director on the Board of Directors of the Exchange shall submit duly filled Form and
undertaking appearing hereunder as Annexure 3A-1 & 3A-2 respectively. Any person nominated as a member of any
committee shall submit duly filled form 3A-1 to the extent applicable.
Page 11 of 192
Karachi Stock Exchange Regulations
Annexure 3A-1
INFORMATION TO BE PROVIDED BY PERSONS DESIRING PROSPECTIVE DIRECTORSHIP ON THE BOARD OF THE
KARACHI STOCK EXCHANGE
1
Curriculum Vitae/Resume containing:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
Name:
Father’s or Husband Name:
CNIC # (attached copy):
Latest photograph:
Nationality:
Age:
Contact details:
i)
Residential address:
ii)
Business address:
iii) Tel:
iv) Mobile:
v) Fax:
vi) E-mail:
National Tax Number:
Present occupation:
Qualification(s):
i)
Academic:
ii)
Professional:
Experience: (Positions held during the last 10 years along with name and address of
company/institution). Information to be provided on the following sample format*.
Sr. No.
Name of Organization
Designation
Period
From
1.
2.
Till
Company A
Company B
2
.
1. Nature of directorship:
Executive
2. Status of directorship:
Nominee director
*
Number of shares subscribed or held ______________________________
Nominated by _______(name of shareholder/ nominating entity)_________
3
Non-executive
Elected Director
Names of companies, firms and other organizations of which the proposed person is presently a
director, partner, office holder or major shareholder (Information to be provided on the following sample
format*)
Sr. No.
Name of Organization
Designation
Period
From
1.
Company A
2.
Company B
Till
4
In the case of nomination of director by a corporate Broker the date of board of directors’ meeting in which the
nomination of proposed director was approved. (Attach copy of the minutes of the meeting of the board of
directors)
5
Names of any persons on the board of the Karachi Stock Exchange who are related to the applicant.
Signature_________________________________________________________
*use additional sheets if required
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Karachi Stock Exchange Regulations
Annexure 3A-2
AFFIDAVIT BEFORE THE SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN/ KARACHI STOCK EXCHANGE
(On Stamp Paper of Appropriate Value)
I,
_____________________
son/daughter/wife
of
_____________________
adult,
resident
________________________________________________________________________ and holding CNIC/Passport
__________________________ do hereby state on solemn affirmation as under:-
of
No.
1.
That I am eligible for the position of Director according to the Fit & Proper Criteria prescribed for the position of Directors,
as per these Regulations.
2.
That I hereby confirm that the statements made and the information given by me are correct and that there are no facts
which have been concealed.
3.
That I have no objection if the Karachi Stock Exchange or the Securities and Exchange Commission of Pakistan requests
or obtains information about me from any third party.
4.
That I undertake to bring to the attention of the Karachi Stock Exchange any matter which may potentially affect my status
for the position of Director as per the Fit and Proper Criteria specified by the Karachi Stock Exchange.
5.
That all the documents provided to the Karachi Stock Exchange, are true copies of the originals and I have compared the
copies with their respective originals and certify them to be true copies thereof.
___________
DEPONENT
The Deponent is identified by me
Signature__________________
ADVOCATE
(Name and Seal)
Solemnly affirmed before me on this _________day of ______________ at ______________ by the Deponent above named who
is identified to me by ___________________, Advocate, who is known to me personally.
Signature_________________________
OATH COMMISSIONER FOR TAKING AFFIDAVIT
(Name and Seal)
Page 13 of 192
Karachi Stock Exchange Regulations
Chapter 4:
4.1.
TRADING RIGHTS ENTITLEMENT (TRE) CERTIFICATE
COMPLIANCE WITH ACT/REGULATIONS:
The TRE Certificate may be conferred by the Exchange on such terms and conditions, rules, regulations, procedures or
guidelines made hereunder in accordance with the provisions of the Act, Securities Ordinance, rules and regulations
made thereunder including KSE Regulations as it may determine or amend them from time to time and the
Memorandum of Association and Articles of the Exchange.
4.2.
ENTITLEMENT OF TRE CERTIFICATE HOLDER TO TRADE:
Subject to fulfilling the conditions required under KSE Regulations, the TRE Certificate Holder who are registered with
the Commission as a Broker under the Brokers and Agents Registration Rules, 2001 shall be eligible to trade on the
Exchange and engage in the business of executing trades/transactions in Securities for their own account or on account
of their clients. The TRE Certificate Holder shall carry out its business in accordance with applicable laws and will give
paramount consideration to safeguarding the interest of Investors and general public and protection of the assets of its
clients.
4.3.
ISSUANCE OF TRE CERTIFICATES BY THE EXCHANGE:
4.3.1. INITIAL SHAREHOLDERS:
The Exchange within thirty (30) days of having granted approval under sub-section (2) of Section 4 of the Act, shall issue
a TRE Certificate to each Initial Shareholder.
4.3.2. OTHER THAN INITIAL SHAREHOLDERS:
The Exchange may invite offers from the eligible persons who also meet the Fit & Proper Criteria for registration as a
Broker; through publication of a notice to general public in widely circulated English and Urdu newspapers for issuance
of TRE Certificates in the manner prescribed by the Commission.
Till the time the restrictions imposed by the Act on the number of TRE Certificates to be issued by the Exchange are in
place, the Board shall prescribe a mechanism with the prior approval of the Commission for selecting the applicants out
of total applicants where the number of applications for issuance of TRE Certificates exceed the maximum number of
TRE Certificates to be issued.
4.4.
APPLICATION TO THE EXCHANGE AND ELIGIBILITY CRITERIA FOR OBTAINING TRE CERTIFICATE:
Any person desirous of obtaining a TRE Certificate shall submit a duly signed application in writing to the Exchange in
such form and accompanied by such documents as may be prescribed by the Exchange from time to time, subject to
approval by the Commission. The applicant must meet the following eligibility criteria for obtaining TRE Certificate:
4.4.1. The applicant must be a Public or a Private company as defined in the Companies Ordinance, 1984 (XLVII of 1984);
4.4.2. The applicant must have a minimum issued and paid-up capital of Rs.50 million;
4.4.3. The Chief Executive of the applicant company must be a citizen of Pakistan and should not be on the board of any
company whose principal activity is investing/ trading in securities market;
4.4.4. The directors/ sponsors/ substantial shareholders of the applicant have not held the office of the directors or have been
sponsors/substantial shareholders in any company viz TRE Certificate Holder or a Member prior to the date of
demutualization, which had been declared defaulter or expelled by the Exchange or whose TRE Certificate has been
cancelled/forfeited by the Exchange;
Explanation: For the purpose of this chapter the term “Substantial Shareholder” shall mean shareholder having more
than 10% shareholding in the TRE Certificate Holder’s company.
4.4.5. At least two Directors of the applicant including the Chief Executive must have a minimum academic qualification of
"Graduation" from a university duly recognized by the Higher Education Commission of Pakistan or foreign qualification
of equivalent level and have at least 2 years of senior level experience in the securities market. However in the case of a
Single Member Company (SMC) incorporated under the Ordinance, the number of directors including the Chief
Executive, may be reduced to one instead of two;
4.4.6. The applicant company must not be engaged in any business other than that of a Broker or other related business as
approved by the Commission from time to time;
4.4.7. No applicant shall be admitted as TRE Certificate Holder of the Exchange if that applicant or any of its
directors/sponsors/substantial shareholders:
Has been adjudged bankrupt or he has been proved to be insolvent even though he has obtained his final
discharge;
(b) Has compounded with his creditors for less than full discharge of debts;
(c) Has been convicted of an offence involving a fraud or dishonesty;
(d) Has been at any time expelled or declared a defaulter by a Stock Exchange/PMEX or it has been debarred from
trading in securities by any regulatory authorities including Commission or any court of law;
(a)
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Incurs such disqualification under the provisions of any applicable laws, rules and regulations for the time being in
force, so as to prohibit or debar such person from seeking TRE Certificate;
(f) Fails to satisfy Exchange that it has adequate staff, resources, risk management and internal control policies,
procedures and systems available to effectively perform its obligations as a TRE Certificate Holder. The Exchange
may accept an undertaking from the applicant at the time of submission of application for issuance or transfer of
TRE Certificate that the applicant will comply with the aforesaid condition before TRE Certificate is
granted/transferred to it by the Exchange; and
(g) Fails to satisfy any other condition imposed by the Board.
(e)
4.5.
TRANSFER OF TRE CERTIFICATE:
4.5.1. A TRE Certificate Holder, holding transferable TRE Certificate, desiring to transfer its TRE Certificate must submit a
written application, complete in all respect, to the Exchange duly signed by both the transferor and transferee, in such
form and accompanied by such documents as may be prescribed by the Exchange from time to time, in accordance with
the provisions of the Act, the Demutualization Regulations and KSE Regulations;
4.5.2. In case of an active TRE Certificate Holder filing his application for transfer, such TRE Certificate Holder shall also
submit a Bank Guarantee or a guarantee by one of the existing TRE Certificate Holders of the Exchange, or a guarantee
by an incoming TRE Certificate Holder or any equivalent security in a manner as may be acceptable to the Exchange to
the extent of an amount prescribed by the Exchange with the approval of the Commission and valid for a period of two
years from the date of transfer of TRE Certificate in order to enable the Exchange to settle all valid claims if received
after the transfer of TRE Certificate.
4.5.3. The transfer application shall be accompanied by an auditor’s certificate confirming that the incoming TRE Certificate
Holder is having issued and paid-up capital as prescribed vide Regulation 4.4.2. above and maintains a net capital
balance as per rule 2(d) of Schedule 3 to the Securities Rules as amended from time to time.
4.5.4. An applicant who does not fulfill the Fit & Proper Criteria specified by the Commission from time to time as required
under the Demutualization Regulations made under the Act shall not be eligible and entitled to get TRE Certificate
transferred.
4.5.5. The Exchange shall ensure that not more than one transfer is registered in respect of a TRE Certificate issued to the
Initial Shareholder under Section 5 of the Act and no transfer should be registered in respect of additional TRE
Certificate which is issued under sub section (5) and (6) of Section 16 of the Act..
4.5.6. The Exchange may require transferor and transferee to provide such information as may be required for determining the
eligibility and fit and proper status for registering a transfer of TRE Certificate or for issuing NOC for such transfer.
4.5.7. In respect of notice period for transfer of TRE Certificate, the following procedure shall be adopted:
(a)
IN CASE OF A TRE CERTIFICATE HOLDER WHO HAS BEEN INACTIVE FOR LAST 24 MONTHS FROM THE
DATE OF APPLICATION:
The notice period for inviting objections/claims from all the concerned persons shall be 30 days after the issuance of
notice.
(b)
IN CASE OF ACTIVE TRE CERTIFICATE HOLDER:
The notice period for inviting objections/claims from all the concerned persons shall be 90 days after the issue of
notice.
Provided that each outgoing TRE Certificate Holder shall continue to be liable for any genuine claims received after
the abovementioned notice periods and shall give an undertaking to that effect to the Exchange.
MODES OF INVITING CLAIMS:
Broker shall invite claims from all the concerned persons including his clients through courier, personal delivery
method, facsimile or, email and publication through newspaper having circulation in all cities in which registered and
branch offices of the Broker are situated. Further, the Exchange shall also disclose such information through its
website and also by publication in two widely circulated newspapers in Urdu and English language.
Provided that in the event of an undertaking given by the transferee (on the format prescribed by the Exchange) to
settle all the objections/claims/liabilities of the outgoing TRE Certificate Holder, the Board may, even before expiry of
the 30 or 90 days’ notice period, as the case may be, consider and accept the transfer application.
4.5.8. In case the outgoing TRE Certificate Holder is a Participant of CDC and Clearing Member of NCCPL, it shall be required
to notify the CDC and NCCPL about its application made to the Exchange for transfer of TRE Certificate and shall also
submit to the Exchange, NOC of the CDC and NCCPL in this behalf.
4.6.
APPLICABILITY OF ELIGBILITY CRITERIA ON CONTINUED BASIS:
The TRE Certificate Holders shall comply with the eligibility criteria as specified in clause 4.4. above relating to issuance
and transfer of TRE Certificate at all times.
Provided that the Board may waive/relax minimum educational qualification requirement in case the Chief Executive of a
brokerage house (which was a member of the Exchange prior to the Demutualization), has the stock market experience
of at least 5 years as a Broker or an Agent or director of any of the Brokers of the Exchange.
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Provided further that, in the case of conversion of an individual TRE Certificate Holder into a corporate body within the
time period as provided in the Act, the minimum educational qualification requirement for the Chief Executive shall not
apply where the same individual continues as a Chief Executive of the corporate body.
Provided further that the eligibility criteria shall not apply to the Initial TRE Certificate Holders of the Exchange till the
time the Exchange, with prior approval of the Commission, notifies its application on such TRE Certificate Holders with
adequate notice period.
4.7.
DECISION OF THE EXCHANGE:
4.7.1. The Exchange shall accept or reject an application for issuance of a TRE Certificate within 30 days and its decision shall
be final, conclusive and binding on the applicant. The Exchange may reject any application without assigning any reason.
4.7.2. The Exchange may only allow a transfer of TRE Certificate after all his liabilities are settled and there are no claims
whatsoever against him on the date of transfer in respect of any transaction or dealing made with any other TRE
Certificate Holder/Broker or Brokers of other Stock Exchanges or the Investors subject to KSE Regulations, NCCPL
Regulations or any other relevant capital market regulations or any violation thereof.
4.7.3. Further, in case of transfer of TRE Certificate, the BMC of the outgoing TRE Certificate Holder shall not be released by
the Exchange until the transfer process is complete or in case where the transferee has provided an undertaking to the
Exchange under clause 4.5.7., the BMC is deposited by such transferee.
4.7.4. Where an application for issuance of new or transfer of existing TRE Certificate is accepted, the Exchange shall issue a
TRE Certificate to the applicant or register the transfer, as the case may be, in compliance with the requirements of the
Act , Demutualization Regulations and KSE Regulations.
4.8.
TRANSFER OF SHARES, CHANGE OF LEGAL STATUS AND OWNERSHIP:
The requirements of Demutualization Regulations shall be applicable for any change in control or change in legal status
of a TRE Certificate Holder.
4.9.
RELINQUISHMENT/SURRENDER AS A TRE CERTIFICATE HOLDER:
4.9.1. A TRE Certificate Holder may after giving one month’s notice to the Exchange voluntarily surrender his TRE Certificate
and remove himself as a TRE Certificate Holder from the Exchange. However, the Exchange may only accept a TRE
Certificate Holder’s voluntary removal from the Exchange after all his liabilities are satisfied and there are no claims
whatsoever against him in respect of any money owed by him to any other TRE Certificate Holder/Broker or Brokers of
other Stock Exchanges or the Investors. The Exchange shall invite claims from Investors and other TRE Certificate
Holders and a 90 days period shall be provided for submitting claims. Provided that in the case of an inactive TRE
Certificate Holder, as described in Regulation 4.5.7.(a), the notice period shall be 30 days.
Provided further that in case of an active TRE Certificate Holder opting for voluntary surrender of TRE Certificate, such
TRE Certificate Holder shall also submit a Bank Guarantee or a guarantee by one of the existing TRE Certificate Holders
of the Exchange, or any equivalent security in a manner as may be acceptable by the Exchange to the extent of an
amount prescribed by the Exchange with the approval of the Commission and valid for a period of two years from the
date of surrender of TRE Certificate in order to enable the Exchange to settle all valid claims if received after the
surrender of TRE Certificate. Provided that such TRE Certificate Holder shall remain liable for any genuine claims
received after the abovementioned notice periods and shall give an undertaking to that effect to the Exchange.
4.9.2. No TRE Certificate Holder may sell, relinquish, transfer, pledge, mortgage or create any trust, charge, lien or any other
encumbrance over the TRE Certificate in physical form he holds, let, sublet, assign, alienate or otherwise dispose off his
TRE Certificate except with the prior written approval of the Exchange which may be given subject to any conditions
imposed by the Exchange which it may think fit. Nor he shall assign any of his rights, benefits or privileges as a holder of
TRE Certificate otherwise than in accordance with KSE Regulations.
Pending such approval, the KSE Regulations shall continue to bind TRE Certificate Holder who has given notice of
relinquishment as if such notice had not been given and the jurisdiction of the Exchange over holder of TRE Certificate,
his or its business, affairs and employees shall in no way be affected by such notice. The Exchange shall not be bound
or compelled in any way to recognize (even when having notice thereof) any dealing or disposition made in
contravention of KSE Regulations.
4.9.3. Further, a TRE Certificate Holder who individually or through any person acting in concert, directly or indirectly,
possesses a “Controlling Interest” in a TRE Certificate Holding Company may not relinquish, transfer, let, sublet, assign,
alienate or otherwise dispose off without the prior written consent of the Exchange. Every TRE Certificate Holder shall
submit pattern of shareholding in the format specified by the Exchange at the end of each quarter.
4.9.4. Upon acceptance of relinquishment request/notice as a TRE Certificate Holder by the Exchange, such TRE Certificate
Holder shall cease to be a TRE Certificate Holder of the Exchange. His name shall be removed from the register of TRE
Certificate Holders and shall be communicated to the Commission accordingly.
4.10. ISSUANCE OF NOC PRIOR TO TRANSFER OF TRE CERTIFICATE:
A TRE Certificate holder, holding transferable TRE Certificate, may request the Exchange to provide a NOC before
entering into any transaction for the transfer of TRE Certificate. The Exchange may issue the NOC after satisfying itself
that the prospective transferee fulfills the eligibility and fit & proper criteria.
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4.11. IN CASE OF ACTIVATION OR REACTIVATION OF A TRE CERTIFICATE HOLDER AS BROKER:
The Exchange shall issue notice for the activation or reactivation of a TRE Certificate Holder as a Broker provided that
the concerned Broker submits the following to the Exchange:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
A copy of valid Broker Registration Certificate confirming its registration as Broker with the Commission under the
Brokers and Agents Registration Rules, 2001;
An original certificate of an Auditor confirming his Net Capital Balance as required under chapter 19 of these
Regulations;
The list of signatories authorized to deal with the Exchange on its behalf;
Basic Deposit as per Deposits, Fee, Contribution and other Sum Schedule along with letter of intention for trading in
the respective market;
Collateral to meet the Base Minimum Capital as prescribed and determined under the chapter 19 of KSE
Regulations;
Proof of his registration as Broker Clearing Member (BCM) with the NCCPL and admission as a Participant with the
CDC;
A letter to the Exchange informing details about its Proprietary UIN and Bank Accounts opened with settling banks
recognized by the Exchange for the purpose; etc.
4.12. ACCREDITED AGENT:
4.12.1. APPROVAL OF APPOINTMENT OF AGENT BY THE EXCHANGE:
A Broker may appoint as many Accredited Agents as it require at any time.
The approval of appointment of Accredited Agents will be granted by the Exchange on having given due notice to
the TRE Certificate Holders of the Exchange and subject to Registration with Commission under the Brokers and
Agents Registration Rules, 2001.
(c) The annual fees for the appointment and renewal of the Accredited Agents by the Exchange shall be paid by the
Brokers as prescribed by the Exchange from time to time.
(a)
(b)
4.12.2. POWERS OF AGENTS:
An Accredited Agent can transact business only on behalf of appointing Broker. He shall not make bargains or sign
contracts in his own name or in any other name except on behalf of or under the instructions of his Broker.
4.12.3. DATA BASE OF AGENTS:
The Exchange shall maintain a database of the Accredited Agents viz name, contact address, name of his employer,
date of joining and leaving of his employment or the withdrawal of his accreditation etc. The updated list of Accredited
Agents shall also be made available on Exchange’s website.
4.12.4. BROKER`S/EMPLOYER’S RESPONSIBILITY:
(a)
(b)
(c)
(d)
(e)
Any Broker desirous of appointing an Agent shall have to make an application to the Exchange for appointment and
registration under Brokers and Agents Registration Rules, 2001 along-with an undertaking signed by such
Accredited Agent as provided in clause 4.12.5. below.
A Broker terminating the employment or withdrawing the authorization of an agent shall notify immediately in writing,
the name of such Agent and the date of termination of his employment or the withdrawal of his authorization and
shall also publish the notice of Agent Registration Cancellation in at least one English and one Urdu widely
circulated newspapers of the country.
After the notice given by the Broker, the Exchange shall issue a notice inviting objections and claims within 24 hours
and in case of no objection or claim is received; it shall proceed with the cancellation of such Agent in accordance
with these Regulations and procedures of the Exchange and circulate the notice sent by the Broker for information
of all concerned. However in case if any objection or claim received by the Exchange it shall proceed according to
the powers conferred to the Exchange under these Regulations.
The Exchange shall forthwith give the notice of such employment, termination or withdrawal to all TRE Certificate
Holders and post the same upon the notice board and website of the Exchange.
The responsibility of a Broker for the acts/bargains of his Accredited Agent shall continue until one day after the
notice of the termination of his employment or the withdrawal of his authorization received by the Exchange.
However, the acts/bargains already made by any such Accredited Agent prior to his termination or withdrawal of his
authorization shall continue to be the responsibility and binding on the Broker who was the employer of such
Accredited Agent.
4.12.5. UNDERTAKING FROM THE ACCREDITED AGENTS:
A Broker desirous of appointing an Accredited Agent shall submit an undertaking to the Exchange signed by such
Accredited Agent as follows:
I shall maintain strict discipline at all times in the trading hall and the premises of the Exchange.
I shall do business on the Exchange in the name of and on behalf of my appointing TRE Certificate Holder only. I
shall not do any business on behalf of other TRE Certificate Holders of the Exchange directly as their constituent or
on account of their constituents.
(c) I shall at all times abide by the Regulations of the Exchange and will not act or indulge in any activities which might
prejudice the fair name or the interest of the Exchange or my appointing TRE Certificate Holder or other TRE
Certificate Holder.
(a)
(b)
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4.13. RESEARCH REPORTS BY THE BROKER AND COMMUNICATION WITH MEDIA:
The Broker;
(a)
(b)
(c)
(d)
(e)
(f)
(g)
May issue research reports on any Security only to his clients and shall not disseminate to the general public;
Shall have formal written policy on the independence and objectivity of research that must be disseminated to all the
employees as well as its clients;
Shall ensure that the person(s) designated to perform research possesses at least 5 years professional experience
in capital markets, depositories, commodities market, banking and related industrial concerns or other closely
related areas and holds at least graduation from a university duly recognized by the Higher Education Commission
of Pakistan or foreign qualification of equivalent level; or
Shall ensure that the person designated to perform research possesses at least 2 years professional experience in
capital markets, depositories, commodities market, banking and related industrial concerns or other closely related
areas and holds licensing accreditation through Institute of Capital Markets of Pakistan;
Shall ensure that the research reports and recommendations therein must have a reasonable and adequate basis
and are reviewed and approved by a supervisor or a dedicated review committee, as the case may be;
Shall continuously monitor and audit the effectiveness of compliance procedures and keep the employees updated
with any changes in these procedures;
Shall make disclosure relating to:
Conflict of interest;
Holding of particular Security by the research analyst, the brokerage house, associated companies and its
directors including the CEO;
(iii) Disclaimer informing that investments in Capital Markets are subject to Market Risk and this publication should
not be construed as an offer, a solicitation or a recommendation to buy/sell any security and/or financial
instruments or offer to participate in any contract;
(iv) The sponsors, directors and employees of brokerage houses shall exercise due care and diligence and shall be
mindful of their obligations and responsibilities in the capacity of a regulated entity and capital market
intermediary while commenting or interacting with the media in any manner.
(i)
(ii)
4.14. REPORT OF VIOLATION OF REGULATIONS:
Every TRE Certificate Holder of the Exchange shall immediately report to the Exchange of any violation of any provisions
of KSE Regulations by any TRE Certificate Holder, which may come into its notice.
The Exchange shall take necessary action in respect of such violations in accordance with these regulations.
4.15. PAYMENT OF FEE/DEPOSIT:
Each applicant shall be required to pay a fee, deposit, charges, contribution or any other sums to the Exchange with the
application for issuance or transfer of TRE Certificate, as prescribed by the Exchange from time to time with the approval
of the Commission.
4.16. DISCIPLINARY MATTERS:
4.16.1. A TRE Certificate Holder who in any manner contravenes the Act, the Ordinance, the Securities Ordinance and rules
made there-under, KSE Regulations, the Procedures, any conditions imposed on the approval of issuance or transfer of
a TRE Certificate or any other requirements imposed on a TRE Certificate Holder may be liable to disciplinary
proceedings. The disciplinary proceedings and the disciplinary powers that may be instituted or exercised against a
holder of TRE Certificate shall be determined by the Exchange in accordance with these regulations.
4.16.2. Without prejudice to the generality of above, the Exchange may exercise any of the following disciplinary powers against
a TRE Certificate Holder and connected persons:
(a)
(b)
(c)
To impose a fine;
To restrict/suspend its trading rights; or
To cancel/forfeit/revoke its TRE Certificate.
4.16.3. A TRE Certificate Holder shall remain bound by KSE Regulations and the disciplinary procedures notwithstanding any
disciplinary proceedings being instituted against it, any conditions being imposed upon it or any of its rights being
suspended.
4.16.4. The Exchange, its officers, directors, employees, Agents or representatives or any other person or entity associated with
the Exchange shall have no liability whatsoever for any losses, damages, claims, legal costs or other expenses that a
TRE Certificate holder may suffer or incur, whether directly or indirectly (including any loss of profit or any damage or
reputation) by reason of any disciplinary proceedings instituted or disciplinary measures taken pursuant to KSE
Regulations.
4.17. REGULATIONS FOR THE MAINTENANCE OF A STANDARDIZED ACCOUNT OPENING FORM:
4.17.1. The Brokers shall adopt the Standardized Account Opening Form (SAOF), attached as Annexure-I to this chapter, as
amended from time to time, for all their Account Holders.
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Explanation:
SAOF contains the minimum Terms and Conditions which are equally binding on the Broker and Account Holder(s).
However, in order to protect the rights of the concerned parties, the Brokers may include additional terms and conditions
preferably in separate section to the SAOF, as long as such terms and conditions do not, in any way, negate or
undermine any other applicable laws, rules, regulations, directives/notices/circulars of the Commission, the Exchange
etc., and the terms and conditions laid down in the said SAOF.
4.17.2. Brokers shall incorporate any amendments in SAOF for their new Account Holders immediately and bring the same into
conformity through addendums for their existing Account Holder(s) within 3 months from the publication of such
amendments in the Official Gazette of Pakistan or any other time period specified by the Exchange from time to time with
prior approval of the Commission. After expiry of such period the Brokers shall not allow any Account Holder to purchase
further securities without complying with the above requirement.
4.17.3. Any amendment in the SAOF pertaining to roles and responsibilities of Brokers shall be binding on them after 7 days’
notice to market participants by the Exchange, whether or not such amendments have been incorporated in the manner
specified above.
4.18. KNOW YOUR CUSTOMER AND CUSTOMER DUE DILIGENCE:
The Brokers shall formulate and implement an effective Know Your Customer (KYC) and Customer Due Diligence (CDD)
internal policy and framework in accordance with the guidelines issued by the Exchange, with the prior approval of the
Commission and any notices or circulars issued by the Commission from time to time. The KYC and CDD policy should
be approved by the Board of Directors of the Broker, if it is a Corporate Brokerage House, and must be appropriately
communicated to every agents and branches of the Broker. The Brokers shall also ensure that the above-mentioned
policies are effectively disseminated to and understood by the relevant personnel.
4.19. SEGREGATION OF CLIENTS’ ASSETS BY THE BROKERS:
4.19.1 The Brokers shall ensure that the assets belonging to their clients are kept separated from the assets of the Broker. For
this purpose, the Broker:
(a)
shall maintain separate bank account(s), with word “clients” in the title, which will include all funds of their clients
along with record/breakdown of clients’ balances. The Broker may keep clients’ unutilized funds in a profit-bearing
bank account and in such case, shall pass on profit earned on these funds to the clients out of the total profit
accrued on such funds, as mutually agreed in writing between the Broker and his clients;
(b)
shall maintain separate sub-accounts under his Participant Account in Central Depository System (CDS) for each of
his clients to maintain the custody of margins deposited by the clients in the form of securities and securities bought
for clients;
(c)
may maintain a Collateral Account under his Participant Account in CDS for all clients. This account shall be used
exclusively for instances where outstanding payment has not been received from clients in respect of securities
purchased on their behalf and relevant purchase obligation is to be settled. In such cases, the Broker will be allowed
to transfer the securities on the respective settlement date from the respective sub-account to the Collateral Account
for a maximum period of three (3) settlement days only to the extent of the transaction volume for which the client’s
payment is outstanding for whatsoever reason and comply with relevant requirements contained in the CDC
Regulations. The Broker shall, in addition to the electronic reporting of such transfers through ways and means as
specified by the Exchange report the Exchange in writing explaining the reason for utilizing the Collateral Account
and/or for holding client’s securities immediately after such transfer. The notice from the Broker will be accompanied
with following documents:
Non-payment notice served on the client through courier, personal delivery method, facsimile, email or properly
recorded telephone line, advising him to make payment by the close of banking hours on the next business day
after the settlement day and notifying that, otherwise the Broker shall have a right to dispose of the required
securities to cover the shortfall in the client’s account at client’s risk and cost;
(ii) Client’s sub-account and Collateral Account Activity Report of movement date and;
(iii) Documentary evidence substantiating the genuineness and circumstances of the reason for non-payment by
the client which may include failure of client to pay in time due to non-clearance of client’s cheque, any natural
calamity, law and order situation, non or delayed functioning of an automated procedure, e.g., NIFT.
(i)
Provided that for a particular client, the Broker is allowed to transfer securities from the sub-account of client to
the Collateral Account only once in a calendar month.
4.19.2 Except as permitted above, the clients’ funds and securities shall not be used by the Broker for any purpose other than
as authorized by the client in writing in the manner and procedure prescribed by the Exchange and/or CDC. The Broker
shall be obliged to maintain and furnish documentary evidence to substantiate the compliance with the above regulations
as and when required by the Exchange.
4.19.3 On the basis of documents mentioned under sub-clause 4.19.1.(c), the Exchange shall determine if the requisite
documents substantiate the transfer of client’s securities by the Broker and shall maintain a database of such transfers.
Exchange may also carryout enquiry and/or special audit in relation to non-compliance with this regulation.
4.19.4 In case of non-compliance on the part of the Broker, as mentioned in sub-clause 4.19.1.(c), is established, after enquiry
and providing opportunity of hearing, the Broker shall be liable to pay penalty of 1.0% of the market value of securities
moved, subject to a maximum penalty of Rs.50,000/-.
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Provided that warning may be issued once on the first instance of non-compliance by the Broker subsequent to
implementation of automated settlement mechanism.
4.19.5 Where non-compliance of sub-clause 4.19.2 and 4.19.3 by a Broker is established, the Exchange may, after providing an
opportunity of being heard to the Broker, impose penalty on such Broker in the manner provided in sub-clause 4.19.4.
4.19.6.(a) The Broker shall submit to the Exchange “Clients’ Assets Segregation Statement” as per format prescribed by the
Exchange within fifteen (15) days of the end of the latest fortnight.
4.19.6.(b) The Broker within fifteen (15) days of the close of its financial year shall submit an annual “Clients’ Assets Segregation
Statement”, duly verified by its Statutory Auditor.
4.19.7 Where non-compliance of Clause 4.19.6 by a Broker is established, the Exchange may, after providing an opportunity of
being heard to the Broker, impose following restrictions and/or penalty on such Broker:
4.20.
(a)
the operation of its all trading terminals may be switched off by the CRO after serving three (3) working days’ notice
for ensuring compliance with the sub-clause 4.19.6.
(b)
The Exchange may restore trading terminals of the Broker upon its full compliance with sub-clause 4.19.6 and
payment of a penalty of Rs. 100,000/- for each default to the Exchange
CONFIRMATION OF CLIENTS’ ORDERS BY TRE CERTIFICATE HOLDERS/ BROKERS:
Whenever an order of any client has been executed by a Broker, confirmation of such execution shall be transmitted to
the said client by the Broker within 24 hours of the execution of such transaction through any previously agreed mode of
communication as specified in the SAOF. The confirmation order shall precisely include the following specific
information:
(a)
(b)
(c)
(d)
(e)
(f)
Date on which order is executed;
Name and number of securities;
Nature of transaction (SPOT, Ready, Future, Leveraged Market, Debt Market and also whether bought or sold);
Price;
Commission rate;
Whether the order is executed for the TRE Certificate Holder’s own account or from the market. {Rule 4(4) of
Securities & Exchange Rules, 1971)}.
Fines:
Once it is established that the Broker is in violation of the above order confirmation requirements, the Chief Regulatory
Officer shall impose a fine amounting to not less than Rs.10,000/- per default but not exceeding Rs.25,000/- per default.
4.21. GENERAL OBLIGATIONS OF TRE CERTIFICATE HOLDERS/BROKERS RELATING TO LEVERAGED MARKETS:
In addition to any obligation of a Broker/TRE Certificate Holder under the applicable laws, agreements or as specified in
the SAOF, the Broker shall ensure the following:
4.21.1. No transaction is executed by the Broker on behalf of a client in the Leveraged Market unless an appropriate agreement
has been executed between the broker and such client.
4.21.2. All risks involved in the relevant transactions have been fully disclosed and the broker has obtained a written
confirmation from its clients that they have understood and have the ability to bear the risks in such transactions.
4.21.3. The options available to a client in respect of various financing facilities in the securities markets have been fully
disclosed and explained to the clients.
4.21.4. All provisions of the Anti-Money Laundering Act, 2010 (Act VII of 2010) and any rules and regulations made there-under
are complied with at all times.
4.21.5. The credit worthiness of clients is evaluated through a proper credit risk assessment methodology and credit limits are
assigned to each client beyond which the client shall not be allowed to take a position in the Leveraged Market.
4.21.6. Maintenance of records evidencing compliance with the aforesaid obligations and that such records remain available for
inspection by the Commission or any other person authorized to do so, at any time.
4.22. TRADING BY EMPLOYEES OF BROKERAGE HOUSES:
4.22.1. The TRE Certificate Holders may allow securities trading to their employees only through their own brokerage houses.
4.22.2. The TRE Certificate Holders shall register their all employees into the UIN database with all registration details including
their respective designations and update/modify the registration details whenever any change occurs.
4.22.3. The TRE Certificate Holders shall ensure that while trading, the concerned employee strictly observes the Code of
Conduct prescribed by the Exchange, which is annexed in Annexure-II to this chapter.
4.22.4. The Exchange will monitor compliance of this Regulation including Code of Conduct. Any breach/violation by the TRE
Certificate Holder or its employees will attract penalties on the concerned TRE Certificate Holder as may be prescribed
by the Exchange from time to time.
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4.22.5. A TRE Certificate Holder shall not allow trading on behalf of another TRE Certificate Holder’s employees. TRE
Certificate Holders shall use the facility mentioned in Regulation 4.22.2. above for this purpose.
Provided that nothing contained in this Regulation shall be applicable on employees of TRE Certificate Holders not
registered as Brokers with the Securities & Exchange Commission of Pakistan under the Brokers and Agents
Registration Rules, 2001 at the relevant time, who may trade in the securities through other brokerage houses under
intimation to the concerned non-broker TRE Certificate Holders and the Exchange.
Penalty:
The Exchange in its sole discretion may impose a penalty of up to Rs.100,000/- on the TRE Certificate Holders for any
single breach/violation of this Regulation including the Code of Conduct by the TRE Certificate Holders or their
employees.
4.23. MANDATORY PROVISION OF QUARTERLY ACCOUNT STATEMENT TO CLIENTS:
Every Broker shall provide within 15 working days of end of each quarter a quarterly account statement to each of its
clients through acceptable mode of communication as provided under Standardized Account Opening Form prescribed
under Chapter 4 of KSE Regulations. The statement must include inter alia the following information for the reporting
period:
(a)
Cash ledger statement showing opening and closing cash balances; all receipts and payments of money and
settlement-wise money obligation debited or credited to the client account;
(b)
Securities positions as per back office record of the Broker showing status of available and pledged securities and
reconciliation for any differences between back office record and CDS record; and
(c)
Securities positions as per CDS record.
4.24. STATUTORY AUDIT OF THE BROKERAGE HOUSES:
All Corporate Brokerage Houses shall have their statutory audit conducted from an auditor enlisted within Category ‘A’ or
‘B’ of the SBP’s Panel of Auditors.
4.25. RECEIPT / PAYMENT OF AMOUNT FROM / TO CUSTOMERS BY THE BROKERAGE HOUSES:
The Brokerage Houses shall receive/make payments of Rs. 25,000/- and above from/to customers drawn on customer’s
own bank account/in the name of customers only in the manner as provided in Standard Terms and Conditions of
Standardized Account Opening Form prescribed under Chapter 4 of KSE Regulations.
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Annexure-I
[NAME OF THE BROKER]
Broker, ___________ Stock Exchange
(Address of Head Office and concerned Branch Office)
Broker Registration No. _______________________
ACCOUNT OPENING FORM
NOTE 1: EACH AND EVERY COLUMN MUST BE FILLED IN
NOTE 2: EACH PAGE OF THIS FORM WILL BE DULY SIGNED BY THE ACCOUNT HOLDER(S) AND THE BROKER
NATURE OF ACCOUNT:
SINGLE:
JOINT:
CLIENT ID / ACCOUNT NO.
COMPANY:
FIRM:
CDC ACCOUNT NO.
ACCOUNT HOLDER
JOINT ACCOUNT HOLDER
ACCOUNT TITLE/ NAME:____________________________
ADDRESS: _____________________________________
________________________________________________
TEL: ___________________________________________
E-MAIL: _________________________________________
FAX NO: ________________________________________
PERMANENT/REGISTERED ADDRESS: ______________
________________________________________________
ACCOUNT TITLE/NAME: _____________________________
ADDRESS: ________________________________________
__________________________________________________
TEL: _____________________________________________
E-MAIL: ___________________________________________
FAX NO: __________________________________________
PERMANENT ADDRESS: ____________________________
__________________________________________________
For individuals only:
DATE OF BIRTH: _________________________________
NATIONALITY: __________________________________
STATUS: ________ RESIDENT _______ NON-RESIDENT
GENDER: _______ MALE ___________ FEMALE
FATHER'S/HUSBAND'S NAME: _____________________
NATIONAL IDENTITY CARD NO. (IN CASE OF NON
RESIDENT PASSPORT NO.): _______________________
OCCUPATION: __________________________________
DATE OF BIRTH: ____________________________________
NATIONALITY: ______________________________________
STATUS: _________ RESIDENT _______ NON-RESIDENT
GENDER: ________ MALE ___________ FEMALE
FATHER'S/HUSBAND'S NAME: ________________________
NATIONAL IDENTITY CARD NO. (IN CASE OF NON
RESIDENT PASSPORT NO.): __________________________
OCCUPATION: _____________________________________
For Companies or Firms only:
Company Registration No. __________________________
STATUS: _______RESIDENT ________ NON-RESIDENT
Declaration of Solvency
The Account Holder hereby declares that:
a)
b)
c)
It has not applied to be adjudicated as an insolvent and that it has not suspended payment and that we have not
compounded with our creditors;
It is not un-discharged insolvent; and
It has not been declared defaulter in repayment of loan of a bank/financial institutions.
Name of Authorized Persons to operate the account
The account shall be operated by the following:
(a)
(b)
(c)
Names
________________________________
________________________________
________________________________
Specimen Signature
________________
________________
________________
Singly/Jointly
___________
___________
___________
The authority of the person(s) authorized to operate the account will be clearly spelled out in the letter of authorization from
the Account Holder.
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MARGIN DEPOSIT
The Account Holder(s) hereby undertakes to deposit and maintain ____ % margin against his/her/their outstanding
trades/exposure for the purpose of trading in his/her/their account. The broker shall notify the Account Holder(s) about any
change in the above margin requirements for the already executed trades at least 3 days prior to the implementation of the
revised margin requirements.
CLIENT BANK DETAILS (OPTIONAL):
ACCOUNT(S) WITH OTHER BROKER(S) (OPTIONAL)
NAME OF THE
BROKER(S)
BROKER
EXCHANGE
CLIENT
ID/ACCOUNT
NAME OF THE BANK: _________________
SAVINGS/CURRENT A/C NO.:___________
BRANCH ADDRESS:___________________
NOMINATION:
(In the event of death of the Account Holder, the nominee shall be entitled to receive securities/cash available in the account
of the account holder after set-off against losses/liabilities in the account.)
Name of Nominee: ________________________ Surname: ____________________
NIC Number: _____________________________
Date of Birth: _____________________________ (DD/MM/YYYY)
Postal Address: _________________________________________________________
Tel: ___________________________________
E-mail: ______________________
SPECIAL TERMS AND CONDITIONS
The terms and conditions set herein below shall be equally binding on the Broker and the Account Holder(s).
1.
All transactions between the parties shall be subject to the Articles, Rules and Regulations of the Exchange, revised
policies, Board Directions and new regulations to be framed in pursuance of Section 34 of the Securities & Exchange
Ordinance, 1969. Moreover, all applicable provisions of the Securities & Exchange Ordinance, 1969 read with the
Securities & Exchange Commission of Pakistan Act, 1997, Brokers and Agents Registration Rules, 2001, Securities and
Exchange Rules 1971 and all directions/directives passed from time to time to regulate the trades between the parties
and to regulate Brokers conduct and the Central Depository Companies of Pakistan Act, 1997, Rules framed there
under and the National Clearing and Settlement System Regulations and any other law for the time being in force. The
Broker shall ensure provisions of copies of all the above Laws, Rules and Regulations at his office for access to the
Account Holder(s) during working hours.
1(a). In case any dispute in connection with the trade or transaction between the Broker and the Account Holder is not
settled amicably, either party may refer the same to arbitration in accordance with the provisions of KSE Regulations,
which shall be binding on both the parties. The Account Holder hereby agrees that he would have no objection if his
name and other relevant particulars are placed on Exchange’s database accessible by Brokers of the Exchange if he
fails or refuses to abide by or carryout any arbitration award passed against him in his dispute with the Broker.
2.
The amount deposited as security margin by the Account Holder(s) with the Broker shall only be used for the purposes
of dealing in securities, such as trading and/or settlement of deliveries of securities on behalf of the Account Holder(s).
The Broker shall not use such amounts for his own use.
2(a). The credit amount of the Account Holder(s) shall be kept by the Broker in a separate bank account titled “Account
Holder/Client Account” and shall not be used by the broker for his own business.
3.
The Broker shall be authorized to act on the verbal instructions of the Account Holder(s). The Broker shall provide a
written confirmation of the executed transactions as required under rule 4(4) of the Securities & Exchange Rules, 1971,
and all such transactions recorded by the Broker in his books shall be conclusive and binding upon the Account
Holder(s), which shall not be questioned by him/her/them, subject to clause 5 below.
Or
The Account Holder(s) shall give written instructions for the sale/purchase of securities to the Broker. The Account
Holder(s) shall not give any verbal/oral instructions. The Broker shall provide a written confirmation of the executed
transactions as required under rule 4(4) of the Securities & Exchange Rules, 1971, and all such transactions recorded
by the Broker in his books shall be conclusive and binding upon the Account Holder(s), which shall not be questioned
by him/her/them, subject to clause 5 below.
4.
The Broker shall provide the confirmation of the executed transactions to the __________________ (Name of Account
Holder) at the above stated address by means of acceptable mode of communication or by hand subject to
acknowledgement receipt.
5.
In case there are any error(s) in the daily confirmation statement, the Account Holder(s) shall report the same to the
Broker within one-business day of the receipt of confirmation. In case the Account Holder(s) do not respond within one
business day of the receipt of the said daily confirmation statement, the confirmation statement shall be deemed
conclusively accepted by the Account Holder(s).
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6.
In the event that the Account Holder(s) fail(s) to deposit additional cash or securities as margin within one business day
of the margin call (in writing), the Broker shall have absolute discretion to and, without further notice to Account
Holder(s), liquidate the Account Holder(s) outstanding positions, including the securities purchased and carried in such
account, so that the margin is maintained at the required level.
7 (a) The Broker shall be responsible to ensure delivery of CDC eligible securities in the CDC account of the Account
Holder(s) subject to full payment by the Account Holder(s). In case of companies which are not on the CDS, the Broker
shall ensure delivery of physical shares along with verified transfer deeds against payments, to the Account Holder(s).
Further, the Broker shall be responsible for the payment of any credit cash balance available in the account of the
Account Holder preferably in form of A/c Payee cross cheque only within 1 business day of the request of the Account
Holder(s) (subject to the maintenance of the margin requirements).
(b) In the event of non-receipt of payment from the Account Holder on settlement day against securities bought on account
of the Account Holder, the Broker may transfer such securities to his Collateral Account under intimation to the
Exchange, after complying with the requirements as mentioned in relevant clause of this chapter.
8.
The Broker shall accept from the Account Holder(s) payments through "A/c Payee Only" crossed cheque, bank drafts,
pay orders or other crossed banking instruments in case of amounts in excess of Rs. 25,000/-. Electronic transfer of
funds to the Broker through banks would be regarded as good as cheque. The Broker shall be responsible to provide
the receipt to the Account Holder(s) in the name of the Account Holder(s) duly signed by authorized agents/employee of
the Broker and the Account Holder(s) shall be responsible to obtain the receipt thereof. In case of cash dealings, proper
receipt will be taken and given to the Account Holder(s), specifically mentioning if payment is for margin or the purchase
of securities. The broker shall immediately deposit in its bank account all cash received in whole i.e. no payments shall
be made from the cash received from clients. However, in exceptional circumstances, where it becomes necessary for
Broker to accept cash in excess of Rs.25,000/-, the Broker shall immediately report within one business day such
instances with rationale thereof to the Exchange in accordance with the mechanism prescribed by the Exchange.
9.
The Brokers shall make all the payments of Rs.25,000/- and above, through crossed cheques / bank drafts / pay orders
or any other crossed banking instruments showing payment of amount from their business bank account. Copies of
these payment instruments including cheques, pay orders, demand drafts and online instructions shall be kept in record
for a minimum period of five years.
10. The Account Holder(s) shall have a right to obtain a copy of his/her or their ledger statement under official seal and
signature of the Broker or his authorized representative on a periodic basis. In case of any discrepancy in the ledger
statement, the Account Holder(s) shall inform the Broker within 1 day of receipt of the ledger statement to remove such
discrepancy.
11. The Account Holder(s) shall operate the account and execute transactions himself/herself/themselves unless the
Account Holder(s) authorize Mr. /Ms. / __________________ I. D. No. ___________ to transact in the account. All
transactions executed by the authorized person shall be binding upon the Account Holder(s).
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
For Joint Account Holder(s) only:
We, the Account Holders shall operate the account jointly or severally and the instructions issued either jointly or
severally shall be binding on us as well as upon the Broker in respect of the joint titled account.
Or
Our titled account shall be operated only by ____________ who shall be deemed as the authorized person for
operating the joint account or issuing any instructions relating thereto.
The Broker shall be responsible to append a list of his authorized agents/traders and designated employees, who can
deal with the Account Holder(s), with this account opening form and a copy of both the opening form and the list will be
provided to the Account Holder(s). Any change therein shall be intimated in writing to the Account Holder(s) with
immediate effect.
The Broker shall debit the account of the Account Holder(s) for the commission charges or any other charges in
connection with the brokerage services rendered, which shall be clearly detailed in the ledger statement/daily
confirmations.
The Broker shall not disclose the information of the transactions of the Account Holders to any third party and shall
maintain the confidentiality of this information. However, in case the Exchange or the Commission, as the case may be,
requires any such information, the Broker shall be obliged to disclose the same for which the Account Holder(s) shall
not raise any objection whatsoever.
In case a Broker converts his individual brokership rights to corporate brokership and vice versa the agreement and
conditions laid down herein above shall remain effective unless otherwise agreed by the parties.
Acceptable mode of communication between the Account Holder(s) and the Broker shall be through letter
(courier/registered post/fax/E-mail) or by hand subject to receipt/acknowledgment. The onus of proving that the e-mail
has been received by the recipient shall be on the sender sending the e-mail. Confirmation of orders to clients made
through fax or e-mail will have a time record.
All orders received telephonically and placed on Trading System shall be supported by recording on dedicated
telephonic lines, preferably connected with a computerized taping system so as the orders could possibly be sorted on
UIN basis and made user friendly.
In case of change of address or contact numbers of either party, the concerned party shall immediately notify the other
party of the changes in writing.
I/We, the Account Holder(s) acknowledge receipt of this account opening form (signed here by me/us in duplicate)
along with the copies of all the annexures and I/we, the Account Holder(s) also undertake that I/we have understood all
the above terms and conditions of this agreement which are acceptable to me/us.
I/We, the Account Holder(s) understand that the shares trading business carries risk and subject to the due diligence on
part of the broker. I/We may incur losses for which I/we, the Account Holder(s) shall not hold the Broker responsible.
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22.
I/We, the Account Holder(s) further confirm that all information given in this application is true and complete and hereby
authorize the Broker to verify any information mentioned above.
______________________
____________________________
Signature of Broker
Signature of Account Holder
____________________________
Signature of Joint Account Holder
WITNESSES:
1. ___________________________________ (I. D. Card No._________________________)
2. ___________________________________(I. D. Card No. _________________________ )
Opened by: ___________________________ Checked by: ___________________________
Date: ________________
Enclosures (for individuals):
1.
2.
3.
4.
5.
Attested copies of National Identity Card of the applicant.
Attested copies of National Identity Card of the Joint Holders and or Nominee(s) (if applicable)
Attested copies of passports of the applicant, Joint Holders and or Nominee(s) (in case of non-residents)
Copy of the letter of authorization from the Account Holder(s) of the person authorized to trade in my/our accounts (if
other than the account holder).
A list of Transaction fee, Commission to be charged by the Broker and other CDC charges to be levied.
Enclosures (for corporate entities):
1.
2.
3.
4.
Certified true copy of Board Resolution (specimen provided as per Annexure-A below).
Certified true copies of Memorandum & Articles of Association.
List of authorized signatories.
List of nominated persons allowed placing orders.
Annexure-A
Board Resolution
"RESOLVED that an application be made on behalf of _______________ (name of entity) to ___________ ("broker") for
opening an Account and for the afore-said purpose the Account Opening Form including Terms and Conditions as set out
herein be executed on behalf of ___________ (name of entity).
FURTHER RESOLVED that Mr. /Ms. _______________ and Mr. /Ms. ______________ be and are hereby authorized and
empowered, either singly/jointly for and on behalf of ________________ (name of entity) to sign and execute and deliver this
Account Opening Form and Terms & Conditions and other documents in connection therewith, and to do any other act, deed
or thing for and on behalf of __________ (name of entity) in respect of company's application for opening an Account.
FURTHER RESOLVED that Mr./Ms. ____________ and Mr./Ms. ______________ be and are hereby authorized and
empowered, either singly/jointly to represent to the broker on all matters pertaining to the maintenance and operation of the
Account, to deal, liase and correspond with broker and give instructions to fulfill all the responsibilities and obligations to
broker under the Law, Rules and Regulations and the Terms & Conditions in relation to the Account from time to time, and to
deal with other incidental and ancillary acts, things and deeds".
Signatures of the Directors
1.
____________________________
2.
____________________________
3.
____________________________
4.
____________________________
5.
____________________________
Date of Resolution: ____________________________
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Annexure-II
CODE OF CONDUCT FOR TRADING BY EMPLOYEES OF BROKERAGE HOUSES
1.
Employees of Brokerage Houses desirous of trading must obtain prior written authorization for such activity from the
Broker or authorized officer of the Brokerage house on his trading account opening form.
2.
Employee must submit to the Broker or authorized officer of the Brokerage house, a written undertaking of his
understanding and willingness to strictly abide by all the relevant rules, regulations, codes and procedures as prescribed
by the Exchange, Clearing Company, Depository Company and the Commission at all times while trading on his own
account.
3.
The provisions of chapter 7 of the KSE Regulations or any other Regulation which may be made from time to time in this
regard would be applicable to such trades.
4.
All trades on behalf of the employees concerned shall be executed against their own respective UINs and shall be
subject to these KSE Regulations.
5.
Employees must ensure that investment advice given to clients by them does not result in a conflict of interest with their
individual trading activities.
6.
The employees should not indulge in buying or selling securities of a company for their own account or any account over
which they exercise control if they possess non-public information or inside information of that company or information
pertaining to any potential trade/deal which may affect the share price of that company. Further, they will not pass any
such information to others.
7.
The employees should not buy or sell those securities for their own account in which they are aware of clients’ proposed
trades, trades by the Brokerage house or forthcoming research report regarding such securities.
8.
Brokers shall monitor their employees’ trades regularly and the Internal Audit Department will ensure compliance of
these KSE Regulations and any violation shall be communicated to Audit Committee/Chief Executive Officer and shall be
submitted to the Exchange and/or the Commission as and when demanded.
9.
Adherence by Brokers as well as their employees, in letter and spirit, to this Code of Conduct is mandatory.
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Chapter 5: LISTING OF COMPANIES AND SECURITIES REGULATIONS
5.1.
DEFINITIONS:
5.1.1. In this chapter, unless there is anything repugnant in the subject or context:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
(v)
(w)
(x)
“Bid Collection Centre”, shall mean pre-determined places where applications for bidding of shares are collected by
the Book Runner on behalf of the Issuer/Offeror and may include offices of Corporate Brokerage Houses, Schedule
Banks, Development Financial Institutions and Investment Finance Companies, subject to appointment of these
institutions as agent by the Book Runner through an agreement in writing for the purpose, with the consent of the
Issuers/Offeror;
“Bidding Period”, shall mean the period during which bids for subscription of shares will be made by Institutional
Investors and HNWI;
“Book Building”, shall mean a mechanism of price determination through which indication of interest for investment
in the shares offered by an Issuer/Offeror is collected from Institutional Investors and HNWI and a book is built which
gives a picture of demand for the shares at different price levels. The Strike Price is determined based on the price
at which demand for the share at the end of Book Building period is sufficient to raise the minimum capital required;
“Book Building Offer”, shall mean the offer made under the Book Building process;
“Book Runner”, shall mean a Corporate Brokerage House, appointed as Book Runner by the Issuer/Offeror;
“Defaulters’ Segment”, shall mean a separate segment of companies, which have committed irregularities
mentioned in clause 5.11.1.;
“Final Prospectus/Offer for Sale Document”, shall mean the prospectus/offer for sale document containing all the
information & disclosures as required under the Companies Ordinance, 1984 together with disclosure of the Strike
Price and results of the Book Building process;
“Floor Price”, shall mean the minimum price set by the Issuer/Offeror for offer of shares;
“General Public”, shall mean all individual and Institutional Investors including both Pakistani (residents & nonresidents) and foreign investors;
“High Net Worth Individual Investor (HNWI)”, shall mean an individual investor who applies or bids for shares of the
value of Rs.1,000,000/- or above in the Book Building process;
“Investment Finance Company”, shall mean an investment finance company as defined in the Non-Banking Finance
Companies (Establishment and Regulation) Rules, 2003;
“Institutional Investor”, shall mean an investor who is not an individual and includes both local and foreign
institutional investors;
“Lead Manager”, shall mean a Corporate Brokerage House, or a Schedule Bank or a Developmental Financial
Institution or an Investment Finance Company appointed as Lead Manager by the Issuer/Offeror;
“Limit Price”, shall mean the maximum price a prospective Institutional Investors or HNWI is willing to pay for a share
under the Book Building process;
“Member” means a member as defined in the Companies Ordinance, 1984;
“Offeror”, shall mean a person who directly or indirectly holds more than 10% of any shares of a public limited
company or a body corporate and offer for sale such shares, in full or in part, to the General Public;
“Offer Price”, shall mean the price per share at which shares are offered for sale to the General Public. This may
either be the Strike Price or a price at a certain discount to the Strike Price;
“Preliminary Prospectus/Offer for Sale Document”, shall mean the preliminary offering document containing all the
information & disclosures as required under the Companies Ordinance, 1984, approved by the Commission under
Section 57 or Section 62 of the Companies Ordinance, 1984 as the case may be and issued to the Institutional
Investors and HNWIs for the Book Building process;
“Prescribed”, means prescribed by these Regulations or under authority hereof;
“Public Issue/Offer”, shall mean issue/offer of shares by an Issuer/Offeror to the General Public;
“Regulations”, shall mean this chapter of the KSE Regulations for the time being in force;
“Step Bid”, shall mean a series of limit bids at increasing prices;
“Strike Price or the Issue Price”, shall mean the price of share determined/discovered on the basis of Book Building
process and is the price at which the shares are issued to Institutional Investors and HNWI;
“Strike order”, shall mean a bid for a specified number of shares at the Strike Price to be determined under the Book
Building process.
5.1.2. Words or expressions defined in the Ordinance and the Securities and Exchange Ordinance shall, except those defined
herein or where the subject or the context forbids, bear the same meanings as in those Ordinances or either of them and
in the case of word or expression bears different meanings under both the Ordinances, that meaning which is carried or
included in the Companies Ordinance, 1984 shall prevail and have preferred application.
5.2.
LISTING OF COMPANIES AND SECURITIES:
5.2.1. DEALING IN THE SECURITIES OF A COMPANY AT THE EXCHANGE:
No dealings in securities of a company shall be allowed on the Exchange, either on the Ready Quotation Board or
Futures Counter, unless the company or the securities have been listed and permission for such dealing has been
granted in accordance with the Regulations.
(b) The permission under sub-regulation 5.2.1.(a) may be granted upon an application being made by the company or in
respect of the securities in the manner prescribed. The Exchange, in granting such permission will consider among
other things, sufficiency of public interest in the company or the securities.
(a)
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The Exchange shall decide the question of granting permission within a maximum period of three months from the
date of receipt of listing application. In case the permission is refused, the reasons thereof will be communicated to
the applicant and the Commission within two weeks of the decision.
(d) The Board will be the sole authority to grant, defer or refuse such permission and may for that purpose, relax any of
these regulations subject only to two-third majority of the directors present at such meeting of the Board and so
resolving.
(c)
5.2.2. LISTING PROCESS AT THE EXCHANGE:
The application for listing shall be made on Form-I by the applicant company and shall be accompanied by the
documents as mentioned in Appendix-I to this chapter.
(b) The Board may require additional evidence declarations, affirmations and information as also other forms to be filled
up and all such requisitions shall be deemed to be prescribed requisitions for the purpose of a proper application for
consideration by the Board for listing.
(c) If an application together with the additional information referred to in sub-clause 5.2.2.(b) is not submitted, the
Board may defer consideration or decline to consider it in which case such application will stand disposed-off as
refused. However, the applicant may move a fresh application after six months from the date of refusal unless the
Board otherwise decides.
(d) An applicant company or security applying for listing shall furnish full and authentic information in respect thereof
and such other particulars as the Board or the Exchange may require from time to time. All routine particulars may
be called for by the Secretary.
(a)
5.2.3. THE EXCHANGE SHALL NOT ENTERTAIN LISTING APPLICATION OF A COMPANY:
(a)
(b)
(c)
(d)
(e)
Whose Chief Executive has been found to have violated the Listing Regulations of any others/listed company on the
Exchange in which he had been the Chief Executive.
Whose promoters/sponsors/controlling directors are in the defaulters list of State Bank of Pakistan either in their
individual capacity or in the capacity of directors of other companies. Or there is an overdue payment reflected
against the name of promoters/ sponsors/ controlling directors in the latest CIB report. Provided that such person will
be allowed if he clears his name after settling his dues. However, this will not apply to nominee directors of the
Government and Financial Institutions. The company shall also provide a list of Controlling Directors.
Whose promoters sponsors/controlling directors are also promoters/ sponsors/controlling directors in other listed
companies, which are in default of any Listing Regulation of the Exchange. Further, no person shall be allowed to
act as sponsor/controlling director of a company which was delisted during last five years and non-compliant of any
Listing Regulation at the time of its delisting. However, this will not apply to nominee directors of the Government
and Financial Institutions. The company shall also provide a list of Controlling Directors.
Which is a wholly owned subsidiary company, of a listed company which has violated Listing Regulations of the
exchange and is still in default of any Listing Regulation.
Which is an associated company of any other listed company which has violated the Listing Regulations of the
Exchange and is still in default of any Listing Regulation. However, this will not apply to nominee directors of the
Government and Financial Institutions.
5.2.4. A running company for one full year or more, reflecting losses in its last audited accounts, shall not qualify for listing if its
equity is eroded by 40% or more.
5.3.
UNDERTAKING:
5.3.1. No listing of a company or security shall be permitted unless the applicant company provides an undertaking on Form-II
to abide by these Regulations.
5.3.2. The Company and/or the authorized representative in respect of securities, as the case may be, shall further undertake:
(a)
(b)
(c)
(d)
(e)
5.4.
that the securities shall be quoted on the Ready Quotation Board and/or the Futures Counter at the discretion of the
Exchange;
that the Exchange shall not be bound by the request of the company to remove its securities from the Ready
Quotation Board and/or the Futures Counter;
that the Exchange shall be authorized and have the right, at any time and without serving notice if it be deemed
proper, to suspend or to remove any shares or securities from the Ready Quotation Board and/or the Futures
Counter for any reason which the Exchange considers sufficient in public interest subject to the procedure laid-down
in Section 9 of the Securities Ordinance;
that such provisions in the articles of association of a company or in any declaration or basis relating to any other
security as are or otherwise not deemed by the Exchange to be in conformity with the Regulations shall, upon being
called upon by the Board, be amended forthwith and until such time as these amendments are made, the provisions
of these Regulations shall be deemed to supersede the articles of association of the company or the nominee
relating to the other securities to the extent indicated by the Board for purpose of amendment;
that the company or the security may be de-listed by the Board in the event of non-compliance and breach of
undertaking given hereunder.
OFFER OF CAPITAL BY COMPANIES/MODARABAS TO THE GENERAL PUBLIC:
5.4.1. In case of Offer of capital by the issuing company by way of IPO or offer for sale, the allocation to General Public shall be
as under:
(a)
FOR COMPANIES SEEKING LISTING:
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i.
ii.
In case post-issue paid-up-capital of the company is up to Rs. 500 million, the allocation of capital to the
General Public, excluding premium amount and Pre-IPO placement, if any, shall not be less than 25% of the
post-issue paid up capital of the company.
In case post-issue paid-up-capital of the company is above Rs. 500 million, the allocation of capital to the
General Public, excluding premium amount and Pre-IPO placement, if any, shall be at least Rs. 125 million or
12.5% of the post-issue paid up capital, whichever is higher. Such company, except a public sector company,
will however, be required to subsequently enhance the quantum of public shareholding to 25% within next four
years of its listing through:
i.
ii.
iii.
iv.
v.
issuance of shares to public through prospectus; or
offer for sale of shares held by the promoters to public through prospectus; or
sale of shares held by the promoters through the secondary market; or
sale of shares to employees under the Employees Stock Option Schemes; or
any other method as may be allowed by the Exchange with the approval of the Commission.
Explanation: For the purpose of this clause:
i.
ii.
iii.
(b)
“public shareholding” means the equity shares of the company held by persons other than the promoters
and subsidiaries of the company;
“public sector company” means a company or a body corporate constituted through any special enactment
and includes a government company; and
“Government company” means a company in which not less than fifty-one per cent of the share capital is
held by the Federal Government, Provincial Government(s) and/or local government(s).
For companies already listed: In case of an already listed company at the Exchange, the allocation of capital through
offer for sale to the general public excluding premium amount and Pre-IPO placement, if any, shall not be less than
Rs.100 million.
5.4.2. The Issuer or the Offeror, as the case may be, may allocate share capital up to twenty percent (20%) of the public offer
to overseas Pakistanis. The amount should be subscribed through proper banking channel.
Provided that in case of under subscription in either of the categories i.e., the quota allocated to resident or non-resident
Pakistanis, the unsubscribed portion will be allocated to the applicants of other category.
5.4.3. The Issuer or Offeror, as the case may be, may allocate share capital up to five percent (5%) of the public offer to its
employees of the company whose shares are offered.
5.4.4. In the case of a Modaraba applying for listing on the Exchange, thirty percent (30%) of the total Paid-up capital shall be
subscribed by the sponsors or their associates or friends, relatives and associated undertakings and the balance of
seventy percent (70%) shall be offered to the General Public..
Provided that the Exchange, if it is satisfied that it is not practicable to comply with the requirements of any of the above
regulations in a particular case or class of cases may, for reasons to be recorded, relax the regulations subject to
approval of the Commission.
5.4.5. THE ALLOCATION OF SHARE CAPITAL:
The following allocation of shares shall not be saleable for a period of six (6) months from the date of public subscription:
(a)
(b)
Sponsors in excess of 25%; and
Allocation of shares, under Pre-IPO placement including employees of the companies / group companies etc.
5.4.6. OFFER/ISSUE THROUGH BOOK BUILDING:
In case where the shares of the company are issued /offered through Book Building, it shall comply with the
requirements as set out in Appendix-2 of this chapter.
5.5.
PROSPECTUS, ALLOTMENT, ISSUE AND TRANSFER OF SHARES:
5.5.1. No Company will be listed unless it is registered under the Ordinance as a public limited company and its minimum paid-
up capital is Rs.200 million.
5.5.2. The Companies registered in Northern Areas and Azad Jammu and Kashmir will be eligible for listing and will be treated
at par with Companies registered in Pakistan.
5.5.3. Despite receiving the application for listing and any preliminary actions thereon, no Company shall be listed unless it has
made a public issue which is subscribed by not less than 500 applications.
5.5.4. The requirements of sub-section 5.5.1. or 5.5.3. shall not apply to listing of Securities other than shares of Companies
unless any law so requires or the Federal Government in the exercise of its powers under the Securities Ordinance so
directs.
5.5.5. The Companies may make a public offer of securities to be eligible securities in the CDS.
5.5.6. In all the prospectuses/offer for sale, the following disclosures must be made:
The audited accounts to be incorporated in the Prospectus / Offer for sale document which shall not be older than 6
months from the date of publication of the Prospectus / Offer for sale document.
(b) Break-up value of the shares on the basis of the latest audited account supported by a certificate from the auditors.
(a)
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In the financial plan, the amount of interest/mark-up/financial charges during pre-production period shall be shown
separately.
(d) A brief write-up of each of the directors and CEO of the company along with academic qualification and relevant
experience.
(e) Detail of project, if any, like status of civil work, break up of plant and machinery, its cost, made, supplier, status i.e.
new or used, ordered, shipped, reached at site, installed, etc. Total project cost, means of financing, cost incurred,
Project implementation schedule, expected date of trial production and commercial production etc.
(f) Any other disclosure which the Exchange may require for the benefit of the investors.
(c)
5.5.7. CLEARING OF PROSPECTUS:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
The prospectus or offer for sale shall be submitted to and cleared by the Exchange before an application for its
approval is made to the Commission. The Exchange may require additional information, data, certification or
requirement to be included in the prospectus or the offer for sale. If any applicant fails to comply with such
requirements, the Exchange may refuse to issue clearance under these Regulations.
The prospectus or the offer for sale shall conform to and be in accordance with the requirements and provisions of
the Companies Ordinance and/or the Securities Ordinance and any other law or legal requirement for the time being
applicable. The application made to the Commission shall, amongst other things, be accompanied by the clearance
given by the Exchange under sub-regulation 5.5.7.(a) above.
Without prejudice to the foregoing, the prospectus or the offer for sale shall fulfill all requirements of the law and
instructions of the Commission as well as the criteria for listing and the guidelines laid down by the Exchange from
time to time, not being inconsistent with law or instructions of the Commission.
The prospectus or offer for sale with the proforma application form shall be published by the company in at least one
widely circulated English and Urdu daily newspaper each at Karachi, Lahore and Islamabad or as the Exchange
may in addition require, at least 7 (seven) days in advance but not more than 30 (thirty) days before the date of the
opening of the subscription list.
The issuer shall make available to the Exchange and to bankers to the issue for distribution printed copies of
prospectus or offer for sale and application forms for shares in the quantity to be determined by the Exchange and
the bankers. The Company shall also accept applications on identical forms.
The Applications for shares shall be accepted only through bankers to the issue, whose names shall be included in
the prospectus or the offer for sale.
The directors or the offerors, as the case may be, shall not participate in subscription of shares offered to the
general public.
5.5.8. The share certificates shall be issued in such marketable lots or in any other manner as may be determined or approved
by the Exchange.
5.5.9. The application money shall be refunded, within such time as is prescribed in regulation 5.5.10.(d), if the company is not
listed at the Exchange for any reason whatsoever or the listing is refused.
5.5.10. SUBSCRIPTION PROCESS:
(a)
(b)
(c)
(d)
(e)
(f)
The Company shall inform the Exchange of the subscription received which information shall be communicated in
writing under the hand of an authorized person with certificate(s) from bankers to the issue, within five (5) working
days of the closing of subscription.
The Company shall take a decision within ten (10) days of the closure of subscription list as to which applications
have been accepted or are successful.
The company shall refund the application money in case of unaccepted or unsuccessful applications within ten (10)
days of the date of such decision.
In case the application for listing is refused by the Exchange, for any or whatsoever reasons, the Company shall
forthwith pay without surcharge all moneys received from applicants in pursuance of the prospectus or the offer for
sale and any such director of the Company shall be, jointly and severally, liable to repay that money with surcharge
at the rate of one and half percent (1-1/2%) for every month or part thereof from the expiration of the fifteenth (15)
day.
In case of over-subscription, the Company, or the Offerors, as the case may be, shall immediately submit to the
Exchange copies of the ballot register of successful applications.
The Company shall dispatch all shares certificates, in marketable lots, within thirty (30) days of the closing of
subscription list to all the successful applicants under intimation to the Exchange.
Provided that where the security has been declared to be an eligible security, share certificates shall be issued by
the Company and deposited directly into the CDS in such manner as may be prescribed by the CDC provided the
applicant has provided his CDC account on the application form.
5.5.11. BROKERAGE TO TRE CERTIFICATE HOLDERS:
The Company or the Offeror, as the case may be, shall, within thirty (30) days of closing of subscription list, pay
brokerage to the TRE Certificate Holders of the Exchange at a rate not more than one percent (1%) of the value of the
shares actually sold through them.
5.5.12. SPLIT/CONSOLIDATION OF PHYSICAL INSTRUMENTS:
The Company shall split allotment letters and letters of right into marketable lots within seven (7) days of receipt of
such application.
(b) The Company shall consolidate or split, as may be required by a Security holder in writing certificates into
marketable lots within thirty (30) days of receipt of such application. In case the split/consolidation results in lots
(a)
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other than marketable lots, the company may charge an amount, which shall not exceed Rs.100/- for each
certificate.
5.5.13. VERIFICATION OF SIGNATURE AND PHYSICAL TRANSFER:
(a)
(b)
The Company shall verify the signature of shareholders within forty eighty (48) hours of such a request.
The Company shall complete shares transfer and have ready for delivery the share certificates lodged for
registration of transfer within forty five (45) days of the application for such transfer and its registration.
5.5.14. CLOSURE OF SHARE TRANSFER BOOKS:
(a)
The Company shall give a minimum of fourteen (14) days’ notice to the Exchange prior to closure of Share Transfer
Books for any purpose.
Provided that the Companies quoted on the Futures Counter shall intimate to the Exchange the dates of their book
closure and corporate actions, if any, on or before twentieth (20th) day of the month with a notice period of at least
twenty one (21) days after the said twentieth (20th) day for commencement of book closure.
The Company shall treat the date of posting as the date of lodgment of shares for the purpose for which shares
transfer register is closed, provided that the posted documents are received by the Company before relevant action
has been taken by the Company.
(c) The Company shall issue transfer receipts immediately on receiving the shares for transfer.
(d) The Company shall not charge any transfer fee for transfer of shares.
(e) The Company shall provide a minimum period of seven (7) days but not exceeding fifteen (15) days at a time for
closure of Shares Transfer Register, for any purpose, not exceeding 45 days in a year as a whole.
(b)
5.5.15. No listed Company shall exercise any lien whatsoever on fully paid shares and nor shall there be any restriction on
transfer of fully paid shares. The same shall apply to all listed Securities.
5.6.
DIVIDENDS AND ENTITLEMENTS:
5.6.1. DISCLOSURE OF MATERIAL INFORMATION TO THE EXCHANGE:
Every listed Company and Issuer of a listed Security shall advise and keep advising the Exchange all decisions of its
Board of Directors relating to cash dividend, bonus issue, right issue or any other entitlement or corporate action and
any other price sensitive information in the manner prescribed by the Exchange from time to time. The said
information is required to be communicated to the Exchange prior to its release to any other person or print /
electronic media.
(b) Whenever a listed Company becomes aware or is made aware of any rumor or report containing material
information that is likely to affect market price of its listed Securities or trading volume, which is in any form
whatsoever and howsoever, including that of being broadcasted/presented through the electronic media and not
limited to an article/news or otherwise, published in a newspaper, newswire, magazine, or any other publication, the
Company should clarify / confirm or deny the rumor or false information and set forth the facts sufficient to clarify the
same in writing to the Exchange, within one (1) day of such publication / broadcast.
(a)
In the event that the Exchange enquires from the Issuer concerning unusual movements in the price or trading
volume of its Securities or any related matters, the Issuer shall respond promptly to the Exchange by giving sufficient
information as is available to the Issuer in order to clarify its position.
Intimation of dividend and of all other entitlements shall be sent to the Exchange not later than fourteen (14) days
prior to commencement of the book closure.
(d) Where any director, CEO, substantial shareholder or executive of a Listed Company or their spouses sell, buy or
take any beneficial position, whether directly or indirectly, in shares of the Listed Company of which he/she is a
director, CEO, substantial shareholder or executive, as the case may be, he/she shall immediately notify in writing to
the Company Secretary. Such director, CEO, substantial shareholder or executive, as the case may be, shall also
deliver a written record of the price, number of shares, form of share certificates, (i.e., whether physical or electronic
into Central Depository System), and nature of transaction to the Company Secretary within two days of effecting the
transaction. The Company Secretary shall immediately forward the same to the Exchange for its dissemination to all
concerned.
(c)
5.6.2. NON COMPLIANCE WITH DISCLOSURE OF MATERIAL INFORMATION TO THE EXCHANGE:
In case a Listed Company or Issuer of a Listed Security fails to communicate the complete financial results timely, or
any other price sensitive information immediately, it will make the company liable to pay penalty at a minimum of
Rs.100,000/- (Rupees one hundred thousand only) and maximum up to Rs.1,000,000/- (Rupees One million only) to
be determined by the Exchange.
(b) In case a Listed Company or Issuer of a Listed Security fails to communicate the accurate/complete financial results,
or any other price sensitive information, the Chief Executive Officer (CEO) as well as Chief Financial Officer (CFO)
of such Listed Company or Issuer will be liable to pay a penalty to be determined by the Exchange. Provided that the
amount of such penalty shall not be less than Rs.100,000/- (Rupees one hundred thousand only) and shall not
exceed Rs.1,000,000/- (Rupees one million only).
(a)
5.6.3. Every Listed Company and Issuer of Listed Security shall send to the Exchange its quarterly and annual financial results,
in the manner prescribed by the Exchange from time to time.
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5.6.4. PROVISION OF STATUTORY REPORTS, AUDITED ACCOUNTS, NOTICE, RESOLUTION AND QUARTERLY
REPORTS TO THE EXCHANGE:
The Company shall send to the Exchange such number of copies of its statutory report, annual report and audited
accounts as may be prescribed by the Exchange not later than twenty one (21) days before a meeting of the
shareholders is held to consider the same.
(b) The Company shall send to the Exchange copies of all notices as well as resolutions prior to their publication and
dispatch to the shareholders and also file with the Exchange certified copies of all such resolutions as soon as these
have been adopted and become effective.
(c) The Company shall send to the Exchange such number of copies of its quarterly accounts as prescribed by the
Exchange from time to time and within the time stipulated under the Ordinance.
(a)
5.6.5. DISPATCH OF DIVIDEND WARRANTS:
(a)
Every listed Company shall:
dispatch the interim and final dividend warrants to the shareholders concerned within the time lines specified in
section 251 of the Ordinance;
(ii) dispatch the interim and final dividend warrants to the shareholders by registered post or through courier
services unless those entitled to receive the dividend require otherwise in writing;
(iii) intimate the Exchange immediately as soon as all the dividend warrants are posted to the shareholders.
(i)
(b)
5.7.
All dividend warrants, in addition to the place of the Registered office of the issuing companies, shall be en-cashable
at Karachi, Hyderabad, Sukkur, Quetta, Multan, Lahore, Faisalabad, Islamabad, Rawalpindi and Peshawar for a
period of three (3) months from the date of issue.
ANNUAL GENERAL MEETINGS/ANNUAL REVIEW MEETINGS, ETC:
5.7.1. HOLDING OF MEETING:
All listed companies shall obtain prior approval of the Exchange in respect of the date and time of holding of its
annual general meetings.
(b) A listed Company shall hold its annual general meetings and lay before the said meetings its financial statements
within four (4) months following the close of financial year. Each Modaraba shall hold an annual review meeting of its
certificate holders and lay before the said meeting its financial statements within four (4) months following the close
of its financial year.
(a)
Provided that it shall be mandatory for a Company to notify the Exchange of any extension in time of holding the
Annual General Meeting by furnishing to the Exchange a copy of the letter of approval from the Commission
allowing such extension, within 48 hours of receipt of the same.
5.7.2. FURNISHING OF MINUTES OF MEETING AND OTHER INFORMATION:
The company shall furnish certified true copies of minutes of its Annual General Meeting and of every extraordinary
general meeting to the Exchange within sixty (60) days of such meeting.
(b) The Company shall furnish to the Exchange a complete list of all its security holders as at 31st December in each
calendar year, duly affirmed to be correct as and upto that date, within thirty (30) days thereof.
(c) Every Listed Company or Issuer of Listed Security shall submit in such form and manner as may be prescribed by
the Exchange from time to time the number and break-up of their Free-Float shares on quarterly basis i.e. as on
March 31, June 30, September 30 and December 31 each year. Such information shall be submitted to the
Exchange within fifteen (15) days of close of each quarter.
(d) A company or an issuer of a Listed Security which fails to communicate the correct details of Free-Float of shares
shall be liable to pay a penalty of Rs. 5,000/- per day from the date of first communication of such details till the
correct details are communicated.
(a)
5.8.
INCREASE OF CAPITAL AND ALLIED ISSUES:
Every listed Company shall immediately advise the Exchange of all decisions taken by its board of directors regarding
any change in authorized, issued or paid-up capital, by issue of bonus shares, right shares or reduction of capital, etc.
5.8.1. THROUGH ISSUING OF ENTITLEMENT LETTERS OR RIGHT OFFERS:
(a)
A listed Company shall issue entitlement letters or right offers in marketable lots to all the Security holders within a
period of thirty (30) days from the date of re-opening of security transfer register of the company closed for this
purpose.
Provided that this regulation shall not apply on the Security which is eligible to be deposited into CDS. In such
cases, the procedure as prescribed by the CDC shall be complied with.
(b)
The company shall pay the following fees for extension granted by the Exchange with regard to issuance of
entitlement letters, etc.
(i)
(ii)
for the first fifteen (15) days
for the next fifteen (15) days
Rs. 250/- per day
Rs. 500/- per day
Failure to seek extension from the Exchange shall make the company liable to a penalty at double the rate of
extension fee provided above.
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Provided that extension shall not be granted beyond 30 days.
5.8.2. THROUGH ISSUING OF BONUS SHARES:
(a)
A listed Company shall issue bonus shares certificates within a period of thirty (30) days from the date of re-opening
of the share transfer register closed for this purpose:
(i)
(ii)
Bonus shares shall be credited into the respective CDS Accounts of shareholders maintained with the CDC or
dispatched to the shareholders concerned by registered post or through courier services unless those entitled to
receive the bonus share certificates require otherwise in writing;
The Exchange shall be immediately intimated as soon as the bonus shares are credited / dispatched to the
shareholders;
Provided that in case of Book-Entry Securities deposited into the CDS, in addition to the above, procedure as
prescribed by the CDC shall also be complied with.
5.9.
LISTING OF SUBSIDIARY COMPANY AND OTHER MATTERS:
5.9.1. SPECIE DIVIDEND OF SUBSIDIARY COMPANY:
A listed company distributing shares of its unlisted subsidiary company in the form of specie dividend, right shares or
any similar distribution, shall get such subsidiary Company listed on the Exchange within a period of one hundred
twenty (120) days from the date of approval of such distribution by the shareholders at a meeting of such company.
(b) In case of failure of such subsidiary company to apply for listing or refusal by the Exchange for such listing on
account of insufficient public interest, or for any other reason whatsoever, the Company distributing specie dividend
shall en-cash the shares of the subsidiary company at the option of the recipients at a price not less than the current
break-up value, or face value, whichever is higher, within thirty (30) days from the expiry of one hundred twenty 120
days or from the date of refusal of listing whichever is earlier, failure in which behalf shall be default in which event
the trading in the shares of the listed Company be suspended by the Board or the company de-listed.
(a)
5.9.2. A listed Company shall obtain prior clearance of the Exchange for any amendment proposed to be made in its
memorandum and articles of association before the same are placed for the approval of the shareholders.
5.9.3. Every listed company shall advise the Exchange of:
the decision to issue Participation Term Certificates and the purpose thereof notwithstanding that application is to be
made to the authorities later;
(b) submit copy of the application made to authorities with relevant details and certified copy of the consent order.
(a)
All material particulars of the Participation Term Certificates including conditions governing the issue, details of
guarantee/ securities, trustees and name of the subscribing institution(s).
5.9.4. Every listed company and issuer of listed security shall notify to the Exchange at least 1 week in advance the date, time
and place of its board meeting specially called for consideration of its quarterly and annual accounts or for declaration of
any entitlement for the security holders in the manner prescribed by the Exchange from time to time.
5.9.5. Where no trading has taken place on the Exchange in the securities of a listed company for a continuous period of 180
days, the Exchange, if it is satisfied that the prices quoted are not in accordance with the market realities, may except in
cases where the earlier quotation is below par value and, with the prior approval of the Commission, quote such
companies at par from the one hundred and eighty first day irrespective of the price earlier prevalent.
5.10. QUALITY OF AUDIT:
5.10.1. All listed companies shall facilitate the Quality Control Review (QCR) of the audit working papers of practicing chartered
accountants, carried out by the Institute of Chartered Accountants of Pakistan (ICAP) and, therefore, shall authorize their
auditors to make available all the relevant information including the audit working papers to the QCR Committee of ICAP.
5.10.2. (a)
No listed company shall appoint or continue to retain any person as an auditor, who has been found guilty of
professional misconduct, by the Commission or by a Court of Law, for a period of five years unless a lesser
period is determined by the Commission. In case a firm has been appointed as an auditor, and if any of its
partners has been held guilty of professional misconduct, the firm shall only be eligible for appointment as an
auditor provided a written confirmation is given by the firm to all the stock exchanges of the country and the
Commission with a copy to ICAP to the effect that such a partner shall not be engaged in the audit of any listed
company for the specified period.
(b) A person appointed as an auditor shall be guilty of “professional misconduct” if he:
fails to report a material misstatement or fact known to him and non-disclosure of which may render the
financial statements misleading or disclosure of which is necessary in his professional capacity;
(ii) fails to obtain sufficient information to warrant the expression of an opinion or his exceptions are sufficiently
material to negate the expression of an opinion;
(iii) makes a statement which is misleading, or deceptive;
(iv) incites any one to commit a criminal offence, or helps or encourages anyone in planning or execution of a
criminal offence which is committed;
(v) agrees with anyone to prevent or obstruct the course of justice by concealing, destroying or fabricating evidence
by a misleading statement which he knows to be untrue;
(i)
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(vi) deceives any person, either by making a statement, which he knows to be false, or by suppressing matters
relevant to a proper appreciation of its significance;
(vii) expresses his opinion on financial statements of any business or enterprise in which he, his firm or a partner in
his firm has substantial interest;
(viii) is penalized under any of the provisions of the Companies Ordinance, 1984 in relation to his function as an
auditor of a listed company; and
(ix) is guilty of any other act which is determined as professional misconduct by the Commission in relation to his
function as an auditor of a listed company.
5.10.3. A listed company shall not appoint or continue to retain any person as an auditor, who is engaged by the company to
provide services that are prohibited or if a person associated with the auditor is, or has been, at any time during the
preceding one year engaged as a consultant or advisor or to provide any services that are prohibited.
Explanation:
For the purposes of this regulation, the expression “associated with” shall mean any person associated with the auditor, if
the person:
is a partner in a firm, or is a director in a company, or holds or controls shares carrying more than twenty percent of
the voting power in a company, and the auditor is also partner of that firm, or is a director in that company or so
holds or controls shares in such company; or
(b) is a company or body corporate in which the auditor is a director or holds or controls shares carrying more than
twenty percent of the voting power in that company or has other interest to that extent.
(a)
Explanation:
For the purposes of this regulation the services that are “prohibited services” shall mean the following:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Preparing financial statements, accounting records and accounting services;
Financial information technology system design and implementation, significant to overall financial statements;
Appraisal or valuation services for material items of financial statements;
Acting as an Appointed Actuary within the meaning of the term defined by the Insurance Ordinance, 2000;
Actuarial advice and reviews in respect of provisioning and loss assessments for an insurance entity;
Internal audit services related to internal accounting controls, financial systems or financial statements;
Human resource services relating to:
(i)
(ii)
Executive recruitment;
Work performed (including secondments) where management decision will be made on behalf of a listed audit
client;
Legal Services;
Management functions or decisions;
Corporate finance services, advice or assistance which may involve independence threats such as promoting,
dealing in or underwriting of shares of audit clients;
(k) Any exercise or assignment for estimation of financial effect of a transaction or event where an auditor provides
litigation support services as identified in paragraph 9.187 of Code of Ethics for Chartered Accountants;
(l) Share Registration Services (Transfer Agents); and
(m) Any other service(s) which the Council with the prior approval of the Commission, may determine to be a “prohibited
service”.
(h)
(i)
(j)
The Commission may on the recommendation of ICAP or in its sole discretion and to the extent deemed fit and proper
exempt one or more services from the restriction aforesaid.
5.11. DE-LISTING, SUSPENSION AND DEFAULTERS’ SEGMENT:
5.11.1. A listed company may be placed in the Defaulters’ Segment, suspended and/ or de-listed for any of the following reasons
and in the manner as provided herein below:
A listed company shall be placed in the Defaulters’ Segment if from three years of the date of formal listing; it has
not started commercial production in the case of a manufacturing company or has not commenced business in the
case of any other company.
(b) A listed company shall be placed in the Defaulters’ Segment if it has failed to hold its Annual General Meeting for
two consecutive years.
(a)
Trading shall be suspended in shares of such company and notice of suspension, including therein the cause of
suspension, shall be disseminated immediately to any other stock exchange(s) on which such company is
listed. The suspension in trading of shares of the company shall continue till the default is rectified and annual
accounts are approved;
(ii) The Exchange shall, on the date of suspension of a company due to violation of Regulation 5.11.1.(b), issue
notice to the company under intimation to the Commission, for rectifying the default within a period of 90 days.
Provided that upon failure to rectify the default within 90 days, the Exchange may, under intimation to the
Commission and on reasonable grounds that the default would be rectified, provide the company with an
additional period of not more than 90 days to rectify the default;
(iii) Upon failure of the company to rectify the default within the period specified by the Exchange under Regulation
5.11.1.(b)(ii), the Exchange through a notice in writing shall delist the company under intimation to the
Commission.
(i)
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(c)
A listed company in which winding-up proceedings have commenced shall be placed in the Defaulters’ Segment and
trading in its shares shall be suspended, in the manner provided in sub-clause (i) and sub-clause (ii) below. The
notice of such suspension, including therein the cause of suspension, shall be disseminated immediately to any
other stock exchange(s) on which such company is listed.
(i)
In case of winding-up by Court, the Exchange shall place the company in the Defaulters’ Segment and suspend
trading in its shares prior to opening of market on the next trading day from the date of receipt of information
regarding commencement of its winding-up. However, in case where the winding-up petition is presented by
creditor(s) or shareholder(s), the company shall be placed in the Defaulters’ Segment and trading in its shares
suspended subject to the following conditions:
i. such creditor or creditors, either severally or jointly, have a claim against the company which is equivalent to
at least ten percent of the equity of the company as per the latest accounts available with the Exchange; or
ii. such shareholder or shareholders, either severally or jointly, own at least ten percent of the company’s paidup capital;
Provided that the Exchange may relax actions to be taken pursuant to sub-clause i. or ii. above, if it
establishes that placement of such company on the Defaulters’ Segment and/or suspension of trading in its
shares, as the case may be, is not in the best interest of the market. However, the Exchange shall ensure that
its decision to grant such relaxation is immediately disseminated to the market participants.
Provided further that where winding-up proceedings are initiated by creditor(s) or shareholder(s) who do not
meet the conditions specified in sub-clause i. or ii. above, the Exchange may place the company in the
Defaulters’ Segment and suspend trading in its shares after expiry of two years from the date of
commencement of the winding-up proceedings, if the matter is yet to be disposed of by the Court.
In case of voluntary winding-up, the Exchange shall place the company in the Defaulters’ Segment and suspend
trading in its shares prior to opening of market on the next trading day from the date of receipt of information
from such company for passing of special resolution for voluntary winding-up;
(iii) Notwithstanding anything contained in Regulations 5.11.1.(c). above, any information regarding commencement
of winding-up of a company shall be disseminated by the Exchange to the market participants prior to opening
of market on the next trading day from the date of receipt of such information.
(ii)
A listed company shall be delisted if its official liquidator/ liquidator has been appointed, whether by the Court or the
company, as the case may be.
(e) A listed company shall be placed in the Defaulters’ Segment if it has failed to pay:
(d)
(i) the annual listing fees as prescribed in these Regulations for a period of 2 years; or
(ii) any Penalty imposed under these Regulations; or
(iii) any other dues payable to the Exchange;
A listed company may be placed in the Defaulters’ Segment and the Exchange may suspend trading in its shares if it
has failed to comply with the requirements of any of these Regulations;
(g) A listed company shall be placed in the Defaulters’ Segment if it for any reason whatsoever refuses to join the CDS
after its securities have been declared eligible securities by the CDC.
(f)
5.11.2. NOTICE TO THE COMPANY ON DEFAULTERS’ SEGMENT:
The Exchange, on the same day of placement of a company in the Defaulters’ Segment under Regulation
5.11.1.(e)., 5.11.1.(f). or 5.11.1.(g)., shall issue instructions to such company for rectifying the default within ninety
(90) days.
(b) Upon failure of the company to rectify the default within the stipulated time period the Exchange shall immediately
suspend trading in shares of the company and simultaneously issue compulsory buy-back directions to the majority
shareholders/ sponsors having control of the company to provide all the shareholders an option for selling their
shares to the majority shareholders/sponsors and the shares tendered by the shareholders shall be purchased by
the majority shareholders/ sponsors. The price for such buy-back of shares shall be fixed by the Exchange in
accordance with Regulation 5.13.
(c) Upon completion of the compulsory buy-back of shares by majority shareholders/sponsors or failure of the company
to comply with the compulsory buy-back directions within such reasonable time as may be specified by the
Exchange in its notice, but not exceeding 90 days in total from the date of such directions, the company shall be
delisted through a notice in writing by the Exchange under intimation to the Commission.
(a)
Provided that in case a company is also listed on another stock exchange in Pakistan but not in similar default as
provided in Regulation 5.11.1.(e). and 5.11.1.(f). above at such other stock exchange, the Exchange shall not issue
any directions for compulsory buy-back of its shares and shall delist the company.
Provided further that if the company is in default as provided in Regulation 5.11.1.(e). at all the stock exchange(s)
where it is listed, the compulsory buy-back directions shall be issued by all the stock exchanges in coordination with
each other.
5.11.3. No company which has been de-listed or suspended shall be restored and its shares re-quoted until it removes the
causes of de-listing/suspension and receives the assent of the Board for the restoration.
5.11.4. No company shall be de-listed under these Regulations, unless such company has been given an opportunity of being
heard.
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5.12. EFFECTS OF SUSPENSION OF TRADING:
EFFECTS OF SUSPENSION OF TRADING IN THE SHARES OF A COMPANY SUSPENDED AT ALL THE STOCK
EXCHANGES ON WHICH IT IS LISTED:
5.12.1. Transfer in the physical shares of such company shall be restricted. However, such restriction shall not be applicable in
cases where:
the Share Registrar/ Transfer Agent/ the company has received transfer request from a shareholder prior to the date
of suspension; or
(b) the shares have been purchased prior to the date of suspension of trading and the shareholder provides proper
instrument of transfer, evidencing purchase of such shares prior to the date of suspension, to the Share Registrar/
Transfer Agent/ the company.
(a)
5.12.2. It shall be mandatory upon the company to ensure that no transfers in physical shares, other than as specified in
Regulation 5.12.1.(a) and 5.12.1.(b) above, take place during the period of suspension. The company shall provide the
Exchange with a copy of its Share Transfer Register, as of the day prior to the day of suspension, and details of any
transfers registered under Regulation 5.12.1.(a) and 5.12.1.(b) subsequent to suspension in trading of its shares shall
also be submitted to the Exchange within 48 hours of registration of such transfer.
5.13. VOLUNTARY DE-LISTING:
5.13.1. Any company intending to seek voluntary de-Iisting from the Exchange shall intimate to the Exchange, immediately, of
the intention of the majority security holders/sponsors to purchase all securities, without exception, from all the security
holders with the purpose to de-Iist the security along with the reasons thereof. Such intimation shall also include
minimum price at which the securities are proposed to be purchased.
Provided that the minimum purchase price proposed by the sponsors will be the highest of the benchmark price based
on any of the following:
(a)
(b)
(c)
(d)
(e)
Current Market Price as of the date the exchange receives the sponsors/ majority security holders’ intimation under
5.13.1
Average Market Price (Annualized)
Intrinsic value per share (estimated net realizable value of assets of the company)
Earnings Multiplier approach (for profitable companies)
The maximum price at which the Sponsors had purchased these shares from the open market in the preceding one
year
Explanation:
Intrinsic value per share:
The intrinsic value per share will be determined on the basis of revaluation of assets, carried out by professional
evaluator approved by Pakistan Banks’ Association (PBA), any Investment Bank or Valuers having relevant expertise
and duly certified by the Auditors falling in Category ‘A’ or ‘B’ of SBP list. The revaluation of assets carried out by the
evaluators shall not be older than six months from the date of receipt of buy-back application. The intrinsic value may
also include any other factor in addition to tangible and intangible assets of company, which may be considered
appropriate by the Exchange, while fixing the price of shares.
Earning Multiplier approach (for profitable companies):
A profitable company is a company that declares an after tax profit for the three years preceding the date of the
application for voluntary de-Iisting as reported in its annual audited accounts.
Fair value = Estimated Earnings * P/E ratio:
Estimated earnings should be arrived at using the weighted average earning per share of the last three years audited
accounts. For this purpose, higher of, weights of 45%, 35% and 20% assigned to preceding three years respectively or
latest earning per share should be used. The P/E ratio to be used may be of the date the Exchange receives the
application under 5.13.1.
This approach is based on the identity that a stock’s current price is the product of its actual earnings per share and the
P/E ratio. The P/E ratio is calculated by dividing the current price by the actual earnings per share. To determine the
value of stock, both the earnings and the P/E ratio will have to be estimated.
Price may be determined as a multiple of the P/E ratio of the related sector as on the date of application for the voluntary
buy-back of shares. Earnings per share may be based on the latest audited accounts of the companies in that sector or a
weighted average earning per share of last 3 years of those companies.
Average Market Price:
Daily closing price of the three years proceeding the date the Exchange receives the intimation under 5.13.1 should be
used to calculate the Average Market Price.
5.13.2. The final minimum purchase price of the securities to be de-Iisted shall be fixed with the approval of the Exchange.
At the same time the Exchange shall determine the minimum percentage of securities to be purchased by sponsors to
qualify for de-Iisting and the same will be communicated to the company.
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5.13.3. In case of disagreement of sponsors on minimum percentage of securities to be purchased as determined by the
Exchange, the sponsors will file an appeal with the Commission within 10 days of receipt of communication of such
determination under intimation to the Exchange. The decision taken by the Commission will be final and binding.
5.13.4. The sponsors/majority shareholders shall submit an undertaking that they will abide by these Regulations, which pertain
to purchase of shares/voluntary de-Iisting of securities.
5.13.5. The sponsors/majority shareholders shall submit an undertaking to the effect that all material disclosures relating to the
affairs of the company have been made to the shareholders of the company and the Exchange and that they do not have
any information which will constitute an offence under Section 15-A of the Securities Ordinance.
5.13.6. The sponsors/majority security holders shall not withdraw their offer to purchase all securities from all the security
holders with the purpose to de-list the security after such proposal has been approved by the company in a general
meeting as required under 5.15.2.
5.14. VOLUNTARY DE-LISTING OF A SECURITY SHALL BE SUBJECT TO THE FOLLOWING:
5.14.1. Approval of the proposal in general meeting of the company by not less than ¾ of the security holders present in person
or by proxy at such general meeting.
5.14.2. Compliance by the company with the prescribed procedure, guidelines/criteria and other terms and conditions as may be
laid down by the Exchange.
The Exchange may for any reason whatsoever refuse to accept the proposal of the company, the purchase price and/or
the request to de-Iist the securities.
5.15. PROCEDURE FOR VOLUNTARY DE-LISTING:
5.15.1. A formal application shall be made by the company for de-listing supported by reasons thereof and the proposed
purchase price along with non-refundable application fee of Rs. 250,000/- (Rupees two hundred and fifty thousand only)
to be paid by the sponsors.
Provided, in case of satisfactory fulfillment of the requirements of the Regulation and delisting of the company from the
Exchange, Rs.150,000/- (Rupees one hundred and fifty thousand only) will be refunded by the Exchange.
5.15.2. On approval by the Exchange of the application, the company shall call a general meeting of its security holders and
pass a special resolution approved by not less than ¾ of their number present at such meeting resolving that the
securities be de-Iisted on the terms stipulated by the Exchange.
5.15.3. A copy of special resolution referred to above shall be sent to the Exchange immediately along with a complete list of
holders of the security to be de-Iisted, containing information with regard to securities held by the majority security
holders and others, their names/category, the number of securities and addresses.
5.15.4. Together with the application for de-Iisting, the company must submit an undertaking from a Purchase Agent (who may
be a commercial bank, or an investment bank or a Broker of the Exchange) on behalf of the majority security holders
which will constitute an irrevocable open offer to purchase at the relevant purchase price the securities from the other
security holders. The said offer to remain valid at least for a period of 60 days or as may be fixed by the Exchange from
the date of commencement of purchase. The purchase agent will provide a Bank Guarantee in an amount and such
format as is demanded by the Exchange to secure this obligation and the said Bank Guarantee will remain valid till at
least 15 days from the expiry date of the said open offer or when all outstanding securities have been purchased by the
majority security holders whichever is earlier.
Provided that where a Broker of the Exchange is appointed as Purchase Agent and the total purchase amount does not
exceed Rs. 2.5 million, the requirement of Bank Guarantee can be replaced with the undertaking of such Broker of the
Exchange on the prescribed format.
Provided further that in case of appointment of purchase agent other than a Broker of the Exchange, all trades shall be
routed through a Broker of the Exchange.
Provided further that all the trades during the initial period of 60 days will be conducted on KATS only irrespective of
marketable lot. The purchase agent will be required to maintain a live bid in the System at the minimum purchase price
approved by the Exchange. The purchase price shall be based on market forces, subject to minimum purchase price
determined by the Exchange.
5.15.5. The application for de-Iisting shall be supported by a written consent of the purchase agent to act as agent for purchase
of the securities to be de-Iisted on behalf of the majority security holders as contemplated by these Regulations.
5.15.6. The company shall convey to all the holders of the securities other than majority security holders on their addresses
available in the records of the company through registered post the decision taken in their General Meeting to purchase
the securities together with a copy of the special resolution and also publish a notice in this behalf duly approved by the
Exchange through two widely circulated newspapers including one of Karachi.
5.15.7. The company shall also submit the following information on completion of the period of purchase of securities to be de-
Iisted:
(a)
(b)
Total number of issued securities (with percentage)
Securities owned by majority security holders before the offer (with percentage)
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(c)
(d)
(e)
(f)
Securities bought under the offer (with percentage)
Total securities currently owned by majority security holders (with percentage)
Securities still outstanding with minority holders (with percentage)
Amount of Bank Guarantee required @ Rs.___________ (at the purchase price approved by the
Exchange/Commission) per outstanding security.
5.15.8. BUY-BACK PROCESS:
(a)
With regard to the outstanding securities identified in para 5.15.7.(e). above, the sponsors shall continue to remain
obliged to purchase the same at the relevant price (purchase price approved by the Exchange/Commission) for a
period of 12 months from the day following the expiry of initial buy-back period of 60 days and the sponsors shall
submit a Bank Guarantee valid for 12 months in an amount and format acceptable to the Exchange to secure such
obligation.
Provided that the requirement of submission of Bank Guarantee will not be applicable where a Broker of the
Exchange act as purchase agent on behalf of the sponsors. In such a situation, the purchase agent will be required
to submit an undertaking in the format prescribed by the Exchange.
(b)
The company once allowed delisting under these Regulations will not be allowed relisting of any of its securities
which have been de-Iisted at least for a period of five years from the date of delisting. However, the Exchange may
allow, on case to case basis, listing of such securities on the Over-the-Counter (OTC) market.
5.16. TIME FRAME FOR COMPLETION FOR REQUIREMENTS:
5.16.1. The company shall immediately intimate (if the decision of its Board of Directors is made during trading hours or before
the beginning of the opening of trading, then intimation to the Exchange must be made during trading hours and
otherwise if the decision is made after trading hours then the intimation must be made to the Exchange before the
opening of trading of the Exchange on the next business day) the decision of its Board of Directors to de-Iist the
securities, including a copy of the relevant resolution passed in this regard.
5.16.2. Within one week of the aforementioned intimation, the company will furnish its sponsors’/majority shareholders
undertaking to purchase the securities owned by persons other than the sponsors at a purchase price. On receipt of such
undertaking, the Exchange shall be empowered to ask for any additional information or details which shall be provided by
the company within 15 days of the date of such request by the Exchange.
5.16.3. The Board on its own or on the basis of recommendations of the Special Committee will determine/approve the purchase
price. The decision of the Board will be communicated to the sponsors/company and shall also be notified and
announced immediately.
Provided that any member of the Board and/or Special Committee holding 2% or more shares of the company applying
for voluntary de-listing will not participate in the deliberations while the case of the company is considered by the
Board/Committee.
5.16.4. The sponsors/majority shareholders will be required to convey their acceptance/refusal to the purchase price approved
by the Board within 7 days of conveying of the relevant decision to them.
If the company wishes to appeal this decision to the Commission it must do so within 10 days of the decision in which
case no further steps will be taken on the deIisting application until the Commission determines the purchase price.
5.16.5. Once the purchase price has been finalized either by determination by the Commission in appeal or by the sponsors
accepting the price stipulated by the Exchange, the company will be required to comply with the following procedure:
(a)
(b)
(c)
(d)
(e)
To obtain approval of the proposal of voluntary de-Iisting in the general meeting of the holders of the securities
within 30 days of the acceptance of sponsors.
After approval of the general meeting, the requirements under Voluntary De-listing Regulations shall be completed
within 7 days of the general meeting to commence the purchase of shares.
The sponsors will purchase the securities for a period of 60-days.
Upon expiry of the said purchase period, the company will submit the relevant documents/information to the
Exchange within a period of 21 days.
After receipt of the required documents/information and compliance of the relevant requirements as stipulated by the
Exchange, the securities of the company shall stand de-listed after a period of 30 days.
5.17. RELAXATION:
Where the Exchange is satisfied that it is not practicable to comply with any requirement pertaining to voluntary delisting
under these Regulations, in a particular case or class of cases, the Exchange may, for reasons to be recorded, relax
such requirement subject to such conditions as it may deem fit.
5.18. LISTING AND ANNUAL FEES:
5.18.1. LISTING FEE SCHEDULE:
(a)
A company applying for listing on the Exchange, shall pay an initial listing fee equivalent to one tenth of one percent
of the PAID-UP-CAPITAL subject to a maximum of rupees two million and five hundred thousand.
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Provided that in case of debt instruments and Open-End Mutual Funds, the initial listing fee shall be charged at the
rate of one twentieth of one percent of the amount of total debt instrument/seed capital of Mutual Fund subject to a
maximum of Rupees 0.5 million.
Whenever, a listed company increases the paid-up capital of any class or classes of its shares, or securities listed
on the Exchange, it shall pay to the Exchange a fee equivalent to one tenth of one per cent of increase in paid-up
capital at par value or 0.4% of the actual amount of additional capital raised, whichever is lower.
(c) Every listed company shall pay, in respect of each financial year of the Exchange, commencing from 1st July and
ending on 30th June next, an annual listing fee calculated on the basis of the company’s *market capitalization,
which shall be payable by or before the 30th September in each calendar year, as per following schedule, subject to
a maximum of Rupees one million and five hundred thousand:
(b)
* Explanation: For the purpose of this sub-clause, the market capitalization shall be calculated by multiplying the
last one year’s volume weighted average price with the company’s outstanding ordinary shares as on June 30, of
the preceding year.
COMPANIES HAVING MARKET CAPITALIZATION
AS ON JUNE 30
Up to Rs.100 million
Above Rs.100 million & up to Rs. 250 million
Above Rs. 250 million & up to Rs.500 million
Above Rs. 500 million & up to Rs.1,000 million
Above Rs. 1,000 million & up to Rs. 2,000 million
Above Rs. 2,000 million & up to Rs.10,000 million
Rs. 50,000+0.1% on excess over Rs.50 Million
Rs. 100,000+0.055% on excess over Rs.100 million
Rs. 182,500+0.025% on excess over Rs. 250 million
Rs. 245,000+0.015% on excess over Rs. 500 million
Rs. 320,000+0.0055% on excess over Rs.1,000 million
Rs. 375,000+0.0025% on excess over Rs.2,000 million
Above Rs.10,000 million
Rs. 575,000+0.0003% on excess over Rs.10,000 million
RATE OF FEE PER ANNUM
Provided that in case of debt instruments and Open-End Mutual Funds, the annual listing fee shall be payable in
respect of each financial year of the Exchange, commencing from 1st July and ending on 30th June next, before the
30th September in each calendar year, as per following schedule:
SIZE OF INSTRUMENT
Up to Rs.150 million
Above Rs.150 million & up to Rs.500 million
Above Rs.500 million
RATE OF FEE
Rs. 30,000
Rs. 40,000
Rs. 50,000
Provided further that the Board may revise the above fees or any of the slabs or add new slabs with the approval of
the Commission.
Provided further that every company applying for listing shall pay annual listing fee for the entire financial year of the
Exchange along with the listing application irrespective of the date of its listing during the financial year.
The above Listing fee or any other sum fixed by the Board shall be payable by 30th September in advance for every
financial year.
(e) Failure to pay the annual fee by 30th September shall make the company liable to pay a surcharge at the rate of 1.5
per cent (one and a half per cent) per month or part thereof, until payment. However, if reasonable grounds are
adduced for nonpayment or delayed payment of annual fee, the Exchange may, reduce or waive the surcharge
liability.
(f) A company applying for enlistment on the Exchange shall, in addition to other fees, pay a sum of Rs. 50,000/(Rupees fifty thousand only) as non-refundable service charges. An open-end mutual fund applying for listing on the
Exchange shall pay a sum of Rs. 25,000/- (Rupees twenty five thousand only) as non-refundable service charges.
(d)
5.18.2. LISTING FEE PAYMENT PROCESS:
All Exchange dues shall be paid by cheques, pay orders or bank drafts payable to the Exchange at any Bank Branch
located in Karachi.
(b) Without prejudice to the action which the Exchange may take under these Regulations in the event of default in
payment of its dues, nothing shall prevent the Exchange from recovering such dues through posting defaulters
names on the notice board of the Exchange or by invoking the process of law and obtaining order of a competent
court.
(a)
5.18.3. DISCIPLINARY ACTIONS AGAINST NON-PAYMENT OF PENALTIES:
Without prejudice to various specific or other Penalties provided or available under these Regulations, the Exchange
shall have powers to place the company in the Defaulters Segment, suspend or delist it, if in the opinion of the
Exchange, such company has defaulted or contravened any of these Regulations.
(b) The placement of a company in the Defaulters Segment, its suspension or de-listing under Regulations 5.11. or the
preceding sub-regulation shall be communicated to the Commission, such company and simultaneously notified to
the market participants, inter-alia by posting it on the notice board and website of the Exchange and publishing it, if
deemed necessary, in the Daily Quotations of the Exchange.
(a)
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Trading in the securities of a suspended or de-listed company shall forthwith cease and shall not commence until the
suspension is withdrawn or the de-listing is restored by the order of the Board.
(d) Trading in the securities of a company placed in Defaulters' Segment, if allowed, shall be affected separately and the
prices shall also be quoted separately in the Daily Quotations until such company is removed from the Defaulters'
Segment and restored to the ready market of the Exchange.
(c)
5.19. CODE OF CORPORATE GOVERNANCE:
All listed companies shall ensure compliance with the following Code of Corporate Governance (CCG). All provisions
except where explicitly stated otherwise are mandatory.
5.19.1. COMPOSITION OF THE BOARD:
The board of directors is encouraged to have a balance of executive and non-executive directors, including independent
directors and those representing minority interests with the requisite skills, competence, knowledge and experience so
that the board as a group includes core competencies and diversity, including gender, considered relevant in the context
of the company’s operations.
For this purpose listed companies shall take the following steps:
(a)
the minority shareholders as a class are facilitated to contest election of directors by proxy solicitation, for which
purpose the listed companies shall:
annex with the notice issued under Section 178(4) of the Ordinance, a statement by a candidate from among
the minority shareholders who seeks to contest election to the board of directors, such statement shall include a
profile of the candidate(s);
(ii) provide information regarding Members and shareholding structure to the candidate(s) representing minority
shareholders; and
(iii) on a request by the candidate(s) representing minority shareholders and at the cost of the company, annex to
the notice issued under Section 178 (4) of the Ordinance an additional copy of proxy form duly filled in by such
candidate(s);
(i)
(b)
the board of directors of each listed company shall have at least one and preferably one third of the total Members of
the board as independent directors. The board shall state in the annual report the names of the non-executive,
executive and independent director(s).
Explanation: For the purpose of this clause, the expression "independent director" means a director who is not
connected or does not have any other relationship, whether pecuniary or otherwise, with the listed company, its
associated companies, subsidiaries, holding company or directors. The test of independence principally emanates
from the fact whether such person can be reasonably perceived as being able to exercise independent business
judgment without being subservient to any form of conflict of interest.
Provided that without prejudice to the generality of this explanation no director shall be considered independent if
one or more of the following circumstances exist:
He/she has been an employee of the company, any of its subsidiaries or holding company within the last three
years;
(ii) He/she is or has been the CEO of subsidiaries, associated company, associated undertaking or holding
company in the last three years;
(iii) He/she has, or has had within the last three years, a material business relationship with the company either
directly, or indirectly as a partner, major shareholder or director of a body that has such a relationship with the
company:
(i)
Explanation: The major shareholder means a person who, individually or in concert with his family or
as part of a group, holds 10% or more shares having voting rights in the paid-up capital of the company;
(iv) He/she has received remuneration in the three years preceding his/her appointment as a director or receives
additional remuneration, excluding retirement benefits from the company apart from a director’s fee or has
participated in the company’s share option or a performance-related pay scheme;
(v) He/she is a close relative of the company’s promoters, directors or major shareholders:
Explanation: Close relative means spouse(s), lineal ascendants and descendants and siblings;
(vi) He/she holds cross-directorships or has significant links with other directors through involvement in other
companies or bodies;
(vii) He/she has served on the board for more than three consecutive terms from the date of his first appointment
provided that such person shall be deemed “independent director” after a lapse of one term.
Any person nominated as a director under Sections 182 and 183 of the Ordinance shall not be taken to be an
"independent director" for the above-mentioned purposes.
The director representing an institutional investor shall be selected by such investor through a resolution of its
board of directors, either specifically or generally, and the policy with regard to selection of such person for
election on the board of directors of the investee company shall be annexed to the Directors' Report of the
investor company.
(c)
professional indemnity insurance cover in respect of independent directors shall be encouraged.
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(d)
executive directors, i.e., paid executives of the company from among senior management, shall not be more than
one third of the elected directors, including the Chief Executive:
Provided that nothing contained in this clause shall supersede any law for the time being in force or regulation made
by any regulator regarding the composition of the board.
5.19.2. MAXIMUM NUMBER OF DIRECTORSHIPS TO BE HELD BY A DIRECTOR:
No person shall be elected or nominated as a director of more than seven listed companies simultaneously:
Provided that this limit shall not include the directorships in the listed subsidiaries of a listed holding company.
5.19.3. FILLING UP A CASUAL VACANCY:
Any casual vacancy on the board of directors of a listed company shall be filled up by the directors at the earliest but not
later than 90 days thereof.
5.19.4. RESPONSIBILITIES, POWERS AND FUNCTIONS OF BOARD OF DIRECTORS:
The board of directors of a listed company shall exercise its powers and carry out its fiduciary duties with a sense of
objective judgment and independence in the best interests of the listed company.
(b) The board of directors of a listed company shall ensure that:
(i) professional standards and corporate values are put in place that promote integrity for the board, senior
management and other employees in the form of a Code of Conduct, defining therein acceptable and
unacceptable behaviors. The board shall take appropriate steps to disseminate Code of Conduct throughout the
company along with supporting policies and procedures and these shall be put on the company’s website;
(ii) adequate systems and controls are in place for identification and redress of grievances arising from unethical
practices;
(iii) a vision and/or mission statement and overall corporate strategy for the listed company is prepared and
adopted. It shall further ensure that significant policies have been formulated;
(a)
Explanation: The significant policies for this purpose may include:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.
xiii.
xiv.
xv.
governance, risk management and compliance issues;
human resource management including preparation of a succession plan;
procurement of goods and services;
investors’ relations including but not limited to general investor awareness, complaints and communication,
etc.;
marketing;
determination of terms of credit and discount to customers;
write-off of bad/doubtful debts, advances and receivables;
capital expenditure, planning and control;
investments and disinvestment of funds;
borrowing of moneys;
determination and delegation of financial powers;
transactions or contracts with associated companies and related parties;
the corporate social responsibility (CSR) initiatives and other philanthropic activities including donations,
charities, contributions and other payments of a similar nature;
health, safety and environment; and
the whistleblower policy.
A complete record of particulars of the significant policies along with the dates on which they were approved or
amended by the board of directors shall be maintained.
(iv) a system of sound internal control is established, which is effectively implemented and maintained at all levels
within the company;
within two years of coming into force of this Code, a mechanism is put in place for an annual evaluation of the
board’s own performance;
(vi) the decisions on the following material transactions or significant matters are documented by a resolution
passed at a meeting of the board:
(v)
i.
ii.
investment and disinvestment of funds where the maturity period of such investments is six months or
more, except in the case of banking companies, non-banking finance companies and insurance companies;
determination of the nature of loans and advances made by the listed company and fixing a monetary limit
thereof.
(vii) the board of directors shall define the level of materiality, keeping in view the specific circumstances of the
company and the recommendations of any technical or executive subcommittee of the board that may be set up
for the purpose.
(c)
The Chairman and the Chief Executive Officer (CEO), by whatever name called, shall not be the same person
except where provided for under any other law. The Chairman shall be elected from among the non-executive
directors of the listed company. The Chairman shall be responsible for leadership of the board and shall ensure that
the board plays an effective role in fulfilling all its responsibilities. The Board of Directors shall clearly define the
respective roles and responsibilities of the Chairman and CEO.
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Provided that this clause shall take effect upon the reconstitution of the board of directors after December 31, 2015.
Provided further that the provisions of clauses 5.19.1.(b), 5.19.1.(d) and 5.19.2. shall take effect when the board is
reconstituted on the expiry of its current term after coming into force of this Code.
5.19.5. MEETINGS OF THE BOARD:
All written notices, including the agenda, of meetings shall be circulated at least seven days prior to the meetings,
except in the case of emergency meetings, where the notice period may be reduced or waived.
(b) The Chairman shall ensure that the minutes of meetings of the board of directors are appropriately recorded. The
Company Secretary shall be secretary to the board.
(a)
In the event that a director of a listed company is of the view that his dissenting note has not been satisfactorily
recorded in the minutes of a meeting of the Board of Directors, he may refer the matter to the Company Secretary.
The director may require the note to be appended to the minutes, failing which he may file an objection with the
Securities and Exchange Commission of Pakistan (SECP) in the form of a statement to that effect. The objection
may be filed with the SECP within 30 days of the date of confirmation of the minutes of the meeting.
5.19.6. SIGNIFICANT ISSUES TO BE PLACED FOR DECISION OF BOARD OF DIRECTORS:
(a)
In order to strengthen and formalize corporate decision-making process, significant issues shall be placed for the
information, consideration and decision of the board of directors of listed companies and/or its committees.
The significant issues for this purpose may include:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
(xviii)
(xix)
(b)
the CEO shall immediately bring before the board, as soon as it is foreseen that the company will not be in a
position of meeting its obligations on any loans (including penalties on late payments and other dues, to a
creditor, bank or financial institution or default in payment of public deposit), TFCs, Sukuks or any other debt
instrument. Full details of the company’s failure to meet obligations shall be provided in the company’s quarterly
and annual financial statements;
annual business plan, cash flow projections, forecasts and strategic plan;
budgets including capital, manpower and overhead budgets, along with variance analyses;
matters recommended and/or reported by the committees of the board;
quarterly operating results of the listed company as a whole and in terms of its operating divisions or business
segments;
internal audit reports, including cases of fraud, bribery, corruption, or irregularities of a material nature;
management letter issued by the external auditors;
details of joint venture or collaboration agreements or agreements with distributors, agents, etc.;
promulgation or amendment to a law, rule or regulation, enforcement of an accounting standard and such other
matters as may affect the listed company;
status and implications of any law suit or proceedings of material nature, filed by or against the listed company;
any show cause, demand or prosecution notice received from revenue or regulatory authorities;
failure to recover material amounts of loans, advances, and deposits made by the listed company, including
trade debts and inter-corporate finances;
any significant accidents, dangerous occurrences and instances of pollution and environmental problems
involving the listed company;
significant public or product liability claims made or likely to be made against the listed company, including any
adverse judgment or order made on the conduct of the listed company or of another company that may bear
negatively on the listed company;
report on governance, risk management and compliance issues. Risks considered shall include reputational risk
and shall address risk analysis, risk management and risk communication;
disputes with labor and their proposed solutions, any agreement with the labor union or collective bargaining
agent and any charter of demands on the listed company;
whistleblower protection mechanism;
report on CSR activities; and
payment for goodwill, brand equity or intellectual property.
Related party transactions:
(i)
(ii)
(iii)
(iv)
The details of all related party transactions shall be placed before the Audit Committee of the company and
upon recommendations of the Audit Committee the same shall be placed before the board for review and
approval.
The related party transactions which are not executed at arm's length price shall also be placed separately at
each board meeting along with necessary justification for consideration and approval of the board on
recommendation of the Audit Committee of the listed company.
The board of directors of a company shall approve the pricing methods for related party transactions that were
made on the terms equivalent to those that prevail in arm’s length transaction, only if such terms can be
substantiated.
Every company shall maintain a party wise record of transactions, in each financial year, entered into with
related parties in that year along with all relevant documents and explanations. The record of related party
transactions shall include the following particulars in respect of each transaction:
i.
Name of related party;
ii.
Nature of relationship with related party;
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iii.
iv.
v.
Nature of transaction;
Amount of transaction; and
Terms and conditions of transaction, including the amount of consideration received or given.
5.19.7. DIRECTORS’ TRAINING PROGRAM:
All listed companies shall make appropriate arrangements to carry out orientation courses for their directors to acquaint
them with this code, applicable laws, their duties and responsibilities to enable them to effectively manage the affairs of
the listed companies for and on behalf of shareholders.
It shall be mandatory for all the directors of the listed companies to have certification under any directors’ training
program offered by institutions - local or foreign - that meet the criteria specified by the SECP:
Provided that from June 30, 2012 to June 30, 2016 every year, a minimum of one director on the board shall acquire the
said certification under this program each year and thereafter all directors shall obtain it:
Provided further that individuals with a minimum of 14 years of education and 15 years of experience on the board of a
listed company—local and/or foreign—shall be exempted from the directors’ training program.
5.19.8. CHIEF FINANCIAL OFFICER (CFO), COMPANY SECRETARY AND HEAD OF INTERNAL AUDIT APPOINTMENT
AND REMOVAL:
The appointment, remuneration and terms and conditions of employment of the Chief Financial Officer (CFO), the
Company Secretary and the Head of Internal Audit of listed companies shall be determined by the board of directors.
The removal of the CFO and Company Secretary of listed companies shall be made with the approval of the board of
directors.
The removal of Head of Internal Audit shall be made with the approval of the board only upon recommendation of the
Chairman of the Audit Committee:
Explanation: For this purpose the term removal shall include non-renewal of contracts of the CFO, Company Secretary
and Head of Internal Audit.
5.19.9. QUALIFICATIONS OF CFO AND HEAD OF INTERNAL AUDIT:
(a)
No person shall be appointed as the CFO of a listed company unless he/she has at least three years of experience
of being engaged in or employed in a public practice (audit/accounting) firm, or in managing financial or corporate
affairs functions of a company and is:
(i)
(ii)
a Member of a recognized body of professional accountants; or
has a postgraduate degree in finance from a recognized university or equivalent.
Provided that individuals serving as CFO of a listed company for the last five years at the time of coming into
effect of this Code shall be exempted from the above qualification requirement.
(b)
No person shall be appointed as the Head of Internal Audit of a listed company unless he/she has three (3) years of
relevant experience in audit or finance or compliance function and is:
(i)
(ii)
(iii)
(iv)
a Member of a recognized body of professional accountants; or
a Certified Internal Auditor; or
a Certified Fraud Examiner; or
a Certified Internal Control Auditor
Provided that individuals serving as Head of Internal Audit of a listed company for the last five years at the time of
coming into effect of this Code shall be exempted from the above qualification requirement.
5.19.10. REQUIREMENT TO ATTEND BOARD MEETINGS:
The CFO and Company Secretary of a listed company or in their absence, the nominee, appointed by the board, shall
attend all meetings of the Board of Directors. Provided that the CFO and Company Secretary shall not attend such part
of a meeting of the Board of Directors, which involves consideration of an agenda item relating to the CFO and Company
Secretary respectively.
5.19.11. CORPORATE AND FINANCIAL REPORTING FRAMEWORK:
The directors of listed companies shall annex statements to the following effect with the Directors’ Report, prepared
under Section 236 of the Ordinance:
(a)
(b)
(c)
(d)
(e)
(f)
The financial statements, prepared by the management of the listed company, present its state of affairs fairly, the
result of its operations, cash flows and changes in equity;
Proper books of account of the listed company have been maintained;
Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting
estimates are based on reasonable and prudent judgment;
International Financial Reporting Standards, as applicable in Pakistan, have been followed in preparation of financial
statements and any departures therefrom has been adequately disclosed and explained;
The system of internal control is sound in design and has been effectively implemented and monitored; and
There are no significant doubts upon the listed company’s ability to continue as a going concern:
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Provided that where necessary the following information shall also be annexed to the Directors’ Reports of listed
companies:
If the listed company is not considered to be a going concern, the fact along with the reasons shall be disclosed;
Significant deviations from last year in operating results of the listed company shall be highlighted and reasons
thereof shall be explained;
iii. Key operating and financial data of last six years shall be summarized;
iv. If the listed company has neither declared dividend nor issued bonus shares for any year, the reasons thereof
shall be given;
v. Where any statutory payment on account of taxes, duties, levies and charges is outstanding, the amount
together with a brief description and reasons for the same shall be disclosed;
vi. Significant plans and decisions, such as corporate restructuring, business expansion and discontinuance of
operations, shall be outlined along with future prospects, risks and uncertainties surrounding the listed
company;
vii. A statement as to the value of investments of provident, gratuity and pension funds, based on their respective
audited accounts, shall be included;
viii. The number of board and committees’ meetings held during the year and attendance by each director shall be
disclosed;
ix. The details of training programs attended by directors;
x. The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name
wise details where stated below) held by:
i.
ii.
i.
ii.
iii.
iv.
v.
vi.
associated companies, undertakings and related parties (name wise details);
mutual funds (name wise details);
directors and their spouse(s) and minor children (name wise details);
executives;
public sector companies and corporations;
banks, development finance institutions, non-banking finance companies, insurance companies, takaful,
modarabas and pension funds; and
vii. shareholders holding five percent or more voting rights in the listed company (name wise details).
Explanation: For the purpose of this sub-clause, the expression “executive” means an employee of a listed
company other than the CEO and directors.
xi.
xii.
The directors’ report shall cover loans, TFCs, Sukuks or any other debt instruments in which the company is in
default or likely to default. There shall be a clear presentation with details as to the aggregate amount of the
debt overdue or likely to become overdue and the reasons for the default/emerging default situation and the
measures taken by the company to address and settle such default situation;
All trades in the shares of the listed company, carried out by its directors, executives and their spouses and
minor children shall also be disclosed.
Explanation: For the purpose of this sub-clause and clause 5.19.15. the expression “executive” means the
CEO, COO, CFO, Head of Internal Audit and Company Secretary by whatever name called, and other
employees of the company for whom the board of directors will set the threshold to be reviewed on an annual
basis and disclosed in the annual report.
5.19.12. DIRECTORS’ REMUNERATION:
There shall be a formal and transparent procedure for fixing the remuneration packages of individual directors. No
director shall be involved in deciding his/her own remuneration.
(a)
Directors’ remuneration packages shall encourage value creation within the company. These shall be subject to prior
approval of shareholders/board as required by company’s Articles of Association. Levels of remuneration shall be
appropriate to attract and retain the directors needed to govern the company successfully.
Subject to the provisions of the Ordinance and the company’s Articles of Association, the shareholders/board shall
determine the remuneration for non-executive directors. However, it shall not be at a level that could be perceived to
compromise their independence.
(b)
The company's Annual Report shall contain details of the aggregate remuneration separately of executive and nonexecutive directors, including salary/fee, benefits and performance-linked incentives etc.
5.19.13. FREQUENCY OF FINANCIAL REPORTING:
The quarterly unaudited financial statements of listed companies shall be published and circulated along with
directors’ review on the affairs of the listed company.
(b) All listed companies shall ensure that second quarterly financial statements are subjected to a limited scope review
by the statutory auditors in such manner and according to such terms and conditions as may be determined by the
Institute of Chartered Accountants of Pakistan (ICAP) and approved by the SECP.
(c) Every listed company shall immediately disseminate to the SECP and the stock exchange on which its shares are
listed all material information relating to the business and other affairs of the listed company that will affect the
market price of its shares. The mode of dissemination of information shall be prescribed by the stock exchange on
which shares of the company are listed.
(a)
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This information may include but shall not be restricted to any material change in the nature of business of the
company; information regarding any joint ventures, merger or acquisition or any material contract entered into or
lost; purchase or sale of significant assets; franchise, brand name, goodwill, royalty, financial plan, etc.; any
unforeseen or undisclosed impairment of assets due to technological obsolescence, etc.; delay or loss of production
due to strike, fire, natural calamities, major breakdown, etc.; issue or redemption of any securities; a major change in
borrowings including projected gains to accrue to the company; any default in repayment or rescheduling of loans;
and change in directors, Chairman or CEO of the listed company:
Explanation: Such information shall be disseminated to the above-mentioned entities as soon as any decision
about above referred matters or any other significant issue is taken by the board or a significant matter requiring
disclosure has come into the knowledge of company’s management.
5.19.14. RESPONSIBILITY FOR FINANCIAL REPORTING AND CORPORATE COMPLIANCE:
(a)
No listed company shall circulate its financial statements unless the CEO and the CFO present the financial
statements, duly endorsed under their respective signatures, for consideration and approval of the Board of
Directors.
It shall be mandatory for the CEO and CFO to have the second quarterly and annual accounts (both separate and
consolidated where applicable) initialed by the external auditors before presenting it to the audit committee and the
Board of Directors for approval.
(b)
The Company Secretary of a listed company shall furnish a Secretarial Compliance Certificate, on the prescribed
form attached as Appendix-A, along with annual return filed with the registrar concerned certifying that the
secretarial and corporate requirements of the Ordinance have been complied with.
5.19.15. DISCLOSURE OF INTEREST BY A DIRECTOR HOLDING COMPANY’S SHARES:
Where any director, CEO or Executive of a listed company or their spouses sell, buy or transact, whether directly or
indirectly, in shares of the listed company of which he is a director, CEO or Executive, as the case may be, he shall
immediately notify in writing to the Company Secretary of such transaction. Such director, CEO or Executive, as the case
may be, shall also deliver a written record of the price, number of shares, form of share certificates, i.e., whether physical
or electronic within the Central Depository System, and nature of transaction to the Company Secretary within two days
of effecting the transaction. The Company Secretary shall immediately forward the same to the Exchange for its
dissemination to all concerned. The notice of the director, CEO or Executive, as the case may be, shall also be
presented by the Company Secretary at the meeting of the board of directors immediately subsequent to such
transaction. In the event of default by a director, CEO or Executive to give a written notice or deliver a written record, the
Company Secretary shall place the matter before the board of directors in its immediate next meeting.
Provided that each listed company shall determine a closed period prior to the announcement of interim/final results and
any business decision, which may materially affect the market price of its shares. No director, CEO or Executive shall,
directly or indirectly, deal in the shares of the listed company in any manner during closed period .
The closed period shall start from the day when any document/statement, which forms the basis of price sensitive
information, is sent to the board of directors and terminate after the information is made public.
Every listed company shall advise its directors about the closed period at the time of circulating agenda and working
papers for the board meetings, along with sending intimation of the same to the stock exchanges.
5.19.16. COMMITTEES OF THE BOARD:
Composition
The board of directors of every listed company shall establish an Audit Committee at least of three members
comprising of non-executive directors and at least one independent director. The chairman of the committee shall
preferably be an independent director, who shall not be the chairman of the board. The board shall satisfy itself such
that at least one Member of the audit committee has relevant financial skills/expertise and experience.
(b) There shall also be a Human Resource and Remuneration (HR&R) Committee at least of three Members comprising
a majority of non-executive directors, including preferably an independent director. The CEO may be included as a
Member of the committee but not as the chairman of committee. The CEO if Member of HR&R Committee shall not
participate in the proceedings of the committee on matters that directly relate to his performance and compensation.
(a)
The committee shall be responsible for:
recommending human resource management policies to the board;
recommending to the board the selection, evaluation, compensation (including retirement benefits) and
succession planning of the CEO;
(iii) recommending to the board the selection, evaluation, compensation (including retirement benefits) of COO,
CFO, Company Secretary and Head of Internal Audit; and
(iv) consideration and approval on recommendations of CEO on such matters for key management positions who
report directly to CEO or COO.
(i)
(ii)
(c)
The names of Members of board committees shall be disclosed in each Annual Report of the listed company.
5.19.17. AUDIT COMMITTEE:
Frequency of meetings, attendance, terms of reference and reporting procedures:
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The Audit Committee of a listed company shall meet at least once every quarter of the financial year. These meetings
shall be held prior to the approval of interim results of the listed company by its Board of Directors and before and after
completion of external audit. A meeting of the Audit Committee shall also be held, if requested by the external auditors or
the Head of Internal Audit.
5.19.18. ATTENDANCE AT MEETINGS:
The CFO, the Head of Internal Audit and external auditors represented by engagement partner or in his absence any
other partner designated by the audit firm shall attend meetings of the Audit Committee at which issues relating to
accounts and audit are discussed.
Provided that at least once a year, the Audit Committee shall meet the external auditors without the CFO and the Head
of Internal Audit being present.
Provided further that at least once a year, the Audit Committee shall meet the head of internal audit and other Members
of the internal audit function without the CFO and the external auditors being present.
Provided further that the chairman of the Audit Committee and engagement partner of external auditor or in his absence
any other partner designated by the audit firm shall be present at the AGM for necessary feedback to the shareholders.
5.19.19. TERMS OF REFERENCE:
(a)
The Board of Directors of every listed company shall determine the terms of reference of the Audit Committee. The
Board shall provide adequate resources and authority to enable the Audit Committee carry out its responsibilities
effectively. The Audit Committee shall, inter-alia, recommend to the Board of Directors the appointment of external
auditors, their removal, audit fees, the provision by the external auditors of any service to the listed company in
addition to audit of its financial statements. The Board of Directors shall give due consideration to the
recommendations of the Audit Committee in all these matters and where it acts otherwise; it shall record the reasons
thereof.
The terms of reference of the Audit Committee shall also include the following:
(i)
(ii)
determination of appropriate measures to safeguard the listed company’s assets;
review of quarterly, half-yearly and annual financial statements of the listed company, prior to their approval by
the Board of Directors, focusing on:
i.
ii.
iii.
iv.
v.
vi.
vii.
major judgmental areas;
significant adjustments resulting from the audit;
the going concern assumption;
any changes in accounting policies and practices;
compliance with applicable accounting standards;
compliance with listing regulations and other statutory and regulatory requirements; and
significant related party transactions.
(iii) review of preliminary announcements of results prior to publication;
(iv) facilitating the external audit and discussion with external auditors of major observations arising from interim
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
and final audits and any matter that the auditors may wish to highlight (in the absence of management, where
necessary);
review of management letter issued by external auditors and management’s response thereto;
ensuring coordination between the internal and external auditors of the listed company;
review of the scope and extent of internal audit and ensuring that the internal audit function has adequate
resources and is appropriately placed within the listed company;
consideration of major findings of internal investigations of activities characterized by fraud, corruption and
abuse of power and management's response thereto;
ascertaining that the internal control systems including financial and operational controls, accounting systems
for timely and appropriate recording of purchases and sales, receipts and payments, assets and liabilities and
the reporting structure are adequate and effective;
review of the listed company’s statement on internal control systems prior to endorsement by the Board of
Directors and internal audit reports;
instituting special projects, value for money studies or other investigations on any matter specified by the Board
of Directors, in consultation with the CEO and to consider remittance of any matter to the external auditors or to
any other external body;
determination of compliance with relevant statutory requirements;
monitoring compliance with the best practices of corporate governance and identification of significant violations
thereof; and
consideration of any other issue or matter as may be assigned by the Board of Directors.
5.19.20. REPORTING PROCEDURE:
The Audit Committee of a listed company shall appoint a secretary of the committee who shall either be the Company
Secretary or Head of Internal Audit. However, CFO shall not be appointed as the secretary to the Audit Committee. The
secretary shall circulate minutes of meetings of the Audit Committee to all Members, directors, Head of internal Audit
and the CFO prior to the next meeting of the board and where this is not practicable, the Chairman of the Audit
Committee shall communicate a synopsis of the proceedings to the board and the minutes shall be circulated
immediately after the meeting of the board.
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5.19.21. INTERNAL AUDIT:
(a)
There shall be an internal audit function in every listed company. The Head of internal Audit shall functionally report
to the Audit Committee and administratively to the CEO.
A director cannot be appointed, in any capacity, in the internal audit function to ensure independence of the internal
audit function.
The internal audit function may be outsourced by a listed company to a professional services firm or be performed
by the internal audit staff of holding company. However, due care shall be exercised to ensure that suitably qualified
and experienced persons, who are conversant with the company's policies and procedures, are engaged in the
internal audit. In the event of outsourcing the internal audit function, company shall appoint or designate a fulltime
employee other than CFO, as Head of Internal Audit, to act as coordinator between firm providing internal audit
services and the board.
Provided that while outsourcing the function, the company must not appoint its existing external auditors as internal
auditors.
(b)
All listed companies shall ensure that internal audit reports are provided for the review of external auditors. The
auditors shall discuss any major findings in relation to the reports with the Audit Committee, which shall report
matters of significance to the Board of Directors.
5.19.22. EXTERNAL AUDITORS:
No listed company shall appoint as external auditors a firm of auditors which has not been given a satisfactory rating
under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan.
(b) No listed company shall appoint as external auditors a firm of auditors which or a partner of which is non-compliant
with the International Federation of Accountants' (IFAC) Guidelines on Code of Ethics, as adopted by the Institute of
Chartered Accountants of Pakistan.
(c) The Board of Directors of a listed company shall recommend appointment of external auditors for a year, as
suggested by the Audit Committee. The recommendations of the Audit Committee for appointment of an auditor or
otherwise shall be included in the Directors’ Report. In case of a recommendation for appointment of an auditor
other than the retiring auditor the reasons for the same shall be included in the Directors’ Report.
(d) No listed company shall appoint its auditors to provide services in addition to audit except in accordance with the
regulations and shall require the auditors to observe applicable IFAC guidelines in this regard and shall ensure that
the auditors do not perform management functions or make management decisions, responsibility for which remains
with the Board of Directors and management of the listed company.
(a)
(i)
(ii)
(e)
(f)
All listed companies in the financial sector shall change their external auditors every five years. Financial sector,
for this purpose, means banks, non-banking financial companies (NBFC’s), modarabas and insurance/takaful
companies; provided that all inter related companies/ institutions, engaged in business of providing financial
services shall appoint the same firm of auditors to conduct the audit of their accounts and
All listed companies other than those in the financial sector shall, at a minimum, rotate the engagement partner
after every five years.
No listed company shall appoint a person as an external auditor or a person involved in the audit of a listed company
who is a close relative, i.e., spouse, parents, dependents and non-dependent children, of the CEO, the CFO, an
internal auditor or a director of the listed company.
Every listed company shall require external auditors to furnish a Management Letter to its board of directors within
45 days of the date of audit report:
Provided that any matter deemed significant by the external auditor shall be communicated in writing to the Board of
Directors prior to the approval of the audited accounts by the Board.
5.19.23. COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE:
All listed companies shall publish and circulate a statement in the form as specified in Appendix-B along with their
annual reports to set out the status of their compliance with the requirements set out above. The statement shall be
specific and deemed to be supported by the necessary evidence held by the company making the said statement.
(b) All listed companies shall ensure that the statement of compliance with the best practices of corporate governance is
reviewed and certified by statutory auditors, where such compliance can be objectively verified, before its
publication. Statutory auditors of listed company shall ensure that any non-compliance with the CCG requirements is
highlighted in their review report.
(c) Where the SECP is satisfied that it is not practicable to comply with any of the best practices of corporate
governance in a particular case, it may, for reasons to be recorded, relax the same subject to such conditions as it
may deem fit.
(a)
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Appendix-A
SECRETARIAL COMPLIANCE CERTIFICATE
[See clause 5.19.14.]
Name of company …………………………………………………………………………
To
Company Registration Office
Securities and Exchange Commission of Pakistan
I ………………………………… being the Secretary of [1] …………………………… certify, to the best of my knowledge and
belief, that I am qualified to be appointed as the Company Secretary of a listed company and that the secretarial and corporate
compliance requirements of the Companies Ordinance, 1984, memorandum and articles of association of [1]
…………………………….. and the listing regulations of [2] ………………………….. have been duly complied with for the year
ending …………………..……… *, and that nothing has been concealed or withheld in this regard.
Date:
Place:
Signature (s)
(Name (s) in block letters)
CNIC number
* State exceptions in case of non-compliance.
[1]
[2]
Insert name of the company
Insert names of the stock exchanges on which shares of the company are listed
Note: The declaration need not be:
(a)
(b)
signed before a magistrate or an officer competent to administer oaths; or
stamped as an affidavit
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Appendix-B
STATEMENT OF COMPLIANCE WITH THE CODE OF
CORPORATE GOVERNANCE
[See clause 5.19.23.]
Name
of
company
…………………………………………………………………………
ended………………………………………………………………………………….
Year
This statement is being presented to comply with the Code of Corporate Governance contained in Regulation No.…………… of
listing regulations of …………………… for the purpose of establishing a framework of good governance, whereby a listed
company is managed in compliance with the best practices of corporate governance.
The company has applied the principles contained in the CCG in the following manner:
1.
The company encourages representation of independent non-executive directors and directors representing minority
interests on its board of directors. At present the board includes:
Category
Names
Independent Directors
Executive Directors
Non-Executive Directors
The independent directors meets the criteria of independence under clause 5.19.1.(b) of the CCG.
2.
The directors have confirmed that none of them is serving as a director on more than seven listed companies, including
this company (excluding the listed subsidiaries of listed holding companies where applicable).
3.
All the resident directors of the company are registered as taxpayers and none of them has defaulted in payment of any
loan to a banking company, a DFI or an NBFI or, being a Broker of a stock exchange, has been declared as a defaulter
by that stock exchange.
4.
A casual vacancy occurring on the board on ………….. was filled up by the directors within ………….. days.
5.
The company has prepared a “Code of Conduct” and has ensured that appropriate steps have been taken to
disseminate it throughout the company along with its supporting policies and procedures.
6.
The board has developed a vision/mission statement, overall corporate strategy and significant policies of the company.
A complete record of particulars of significant policies along with the dates on which they were approved or amended has
been maintained.
7.
All the powers of the board have been duly exercised and decisions on material transactions, including appointment and
determination of remuneration and terms and conditions of employment of the CEO, other executive and non-executive
directors, have been taken by the board/shareholders.
8.
The meetings of the board were presided over by the Chairman and, in his absence, by a director elected by the board
for this purpose and the board met at least once in every quarter. Written notices of the board meetings, along with
agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were
appropriately recorded and circulated.
9.
The board arranged ………. training programs for its directors during the year.
10.
The board has approved [1] appointment of CFO, Company Secretary and Head of Internal Audit, including their
remuneration and terms and conditions of employment.
11.
The directors’ report for this year has been prepared in compliance with the requirements of the CCG and fully describes
the salient matters required to be disclosed.
12.
The financial statements of the company were duly endorsed by CEO and CFO before approval of the board.
13.
The directors, CEO and executives do not hold any interest in the shares of the company other than that disclosed in the
pattern of shareholding.
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14.
15.
The company has complied with all the corporate and financial reporting requirements of the CCG.
The board has formed an Audit Committee. It comprises ……. Members, of whom ……… are non-executive directors
and the chairman of the committee is an independent director.
16.
The meetings of the audit committee were held at least once every quarter prior to approval of interim and final results of
the company and as required by the CCG. The terms of reference of the committee have been formed and advised to
the committee for compliance.
17.
The board has formed an HR and Remuneration Committee. It comprises……..Members, of whom……are non-executive
directors and the chairman of the committee is a/an ………..….director.
18.
The board has set up an effective internal audit function/ or has outsourced the internal audit function to ……….. who are
considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the
company.
19.
The statutory auditors of the company have confirmed that they have been given a satisfactory rating under the quality
control review program of the ICAP, that they or any of the partners of the firm, their spouses and minor children do not
hold shares of the company and that the firm and all its partners are in compliance with International Federation of
Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP.
20.
The statutory auditors or the persons associated with them have not been appointed to provide other services except in
accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this
regard.
21.
The ‘closed period’, prior to the announcement of interim/final results, and business decisions, which may materially
affect the market price of company’s securities, was determined and intimated to directors, employees and stock
exchange(s).
22.
Material/price sensitive information has been disseminated among all market participants at once through stock
exchange(s).
23.
We confirm that all other material principles enshrined in the CCG have been complied with [2] except for the following,
toward which reasonable progress is being made by the company to seek compliance by the end of next accounting
year.
Signature (s)
(Name (s) in block letters)
Chairman /CEO
Note: Any exception to the above shall be adequately noted with reasons.
[1]
[2]
In case of new appointments made after the CCG has taken effect
Delete if not applicable
Page 50 of 192
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5.20. PENALTY
5.20.1. Any Company and whoever fails or refuses to comply with, or contravenes any provision of these Regulations, or
knowingly and willfully authorizes or permits such failure, refusal or contravention, shall, be liable to penalty as specified
below:
REGULATION NO.
AMOUNT OF
PENALTY
AMOUNT OF PENALTY FOR EVERY DAY DURING
WHICH THE DEFAULT CONTINUE
5.7.2.(b)
5.5.10., 5.6.4., 5.6.5., 5.7.1., 5.8.2.(a)
5.8.1.(a)
5.7.1.
5.13., 5.14., 5.15., 5.16.
Rs. 10,000
Rs. 200,000
Rs.1,000
Rs. 5,000
Rs. 10,000
Rs. 10,000
5.20.2. In cases where specific Penalty provisions have not been provided in these Regulations, then whoever fails or refuses to
comply with, or contravenes any provision of these Regulations, or knowingly and willfully authorizes or permits such
failure, refusal or contravention, shall, be liable to fine not exceeding five hundred thousand rupees for each default, and,
in case of continuing failure, refusal or contravention, to a further fine not exceeding Rs.10,000/- (Rupees ten thousand
only) for every day after the first day during which such contravention continues.
Provided that no such penalty shall be imposed unless an opportunity of being heard has been granted.
5.20.3. The amount of penalty shall be paid to the Exchange.
5.20.4. The name of company which is in default of Regulation 5.5.10. shall be notified to the TRE Certificate Holders of the
Exchange and placed on the website of the Exchange.
5.20.5. The Exchange may also notify the fact of default and the name of defaulting company, for Regulation 5.6.5., 5.7.1. by
notice and also by publication in the Daily Quotations of the Exchange.
5.20.6. The Board may suspend or if it so decides, delist any company which makes a default in complying with the
requirements of Regulation 5.6.5., 5.7.1., 5.8.2. and 5.9.1.
5.20.7. Any action under this Regulation shall be without prejudice to the action or steps taken by any other person or
Commission.
No company which has been suspended or de-listed, as the case may be, shall be restored and its shares shall be requoted on Exchange until it has paid the full amount of penalty for the days of the default and receives the assent of the
Board for the restoration.
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Appendix-1
DOCUMENTS TO BE SUBMITTED WITH LISTING APPLICATION
The following documents and information shall be submitted by the applicant company to the Exchange along with
application for listing under Sub-Regulation (a) of Regulation 5.2.1:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
An application for Listing on Form I.
Undertakings on Form-II and Form-III.
Copy of the certificate of incorporation.
Copy of the conversion certificate from private to public company; if applicable.
Copy of the certificate of commencement of business.
Copy of the certificate for change of name of the company, if applicable.
Copy of the Feasibility Report, in case of a new project. The report shall contain a letter from the Chief Executive
Officer (CEO)/Partner of the Institution including a Chartered Accountant Firm who has prepared the report, brief
profile of such institution, scope of work of the institution for conducting feasibility study and preparing the report. The
report shall be dated and each page of it shall carry signature or initial of CEO/Partner or any other officer authorized
to do so by the Board of Directors of such institution by way of a Resolution.
Copy of the resolution passed by the Board of Directors and members of the company with respect to listing and issue
of shares to the general public.
Copy of the certificate of registration of Modaraba Management Company, if required.
Copy of authorization for flotation of Modaraba by the Registrar of Modarabas.
Copy of the license, consent, approval, NOC etc. from the concerned regulatory authority for undertaking / carrying on
the business.
Pay Orders/Bank Drafts/Cheques in favor of the Exchange for payment of initial listing fee, annual listing fee and
service charges at the rate as mentioned in Regulation No. 5.18.
Auditor’s Certificate, separately indicating the amount subscribed by the sponsors/ directors/associates/
relatives/friends and shares subscribed by the foreign / local investors under private placement. The certificate shall be
supported by copies of Form-3 i.e., return of allotment of shares.
Auditors’ Certificates under Section 53 read with Clause 28(1) of Section 2 of Part-I of the Second Schedule to the
Companies Ordinance, 1984. The certificate shall also state Earning Per Share (EPS) of the company for the last five
years or for a shorter period if five years of the commencement of business are not completed.
The audited accounts disclosed in the Prospectus / Offer For Sale shall not be older than six months from the date of
publication of the Prospectus / Offer For Sale Document.
15. Auditor’s certificate on the Break-up value of shares on the basis of the latest audited accounts along with its
calculation.
16. Copy of Information Memorandum prepared for placement of shares to local and foreign investors;
17. Names of Directors/shareholders common to the company and the institutions/funds, which have subscribed the
shares under private placement.
18. No Objection Certificates from the Underwriter(s) to the Issue/Offer, if any, on Form-IV.
19. Copies of all material contracts and agreements relating to the public issue/offer of shares and project, if any.
20. Copies of the Consent Letters from Bankers to the issue/offer. The letter shall state that:
(i) the Bank has given its consent to act as one of the Bankers to Issue/Offer;
(ii) this consent has not been withdrawn;
(iii) it has no objection on publication of its name in the prospectus/offer for sale document;
(iv) the bank has undertaken that the subscription money shall be kept in a separate bank account and shall not be
released to the company/the Offeror without prior written approval of the Exchange and/or until the company
is formally listed.
21. Copies of the title deeds of land duly attested by a gazetted officer;
22. Copy of the consent from the auditor, expert, legal advisors to the Issue/Offer, if any under Sub-section (5) of Section
57 of the Companies Ordinance, 1984.
23. Copy of letter jointly signed by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) of the company
confirming that they have reviewed the contents of the draft prospectus / offer for sale / Information memorandum and
to the best of their knowledge and belief these have been stated/disclosed correctly and fairly.
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24. Copies of individual consent letters from all Directors, CEO and Secretary of the company for publishing their names in
their respective capacity in the Prospectus / Offer for dale document / Information memorandum. The consent letters
shall be dated and contain full name, father’s name, CNIC Number & latest postal address of respective person.
25. Copy of consent from the Ballotters to the Issue/Offer.
The Ballotters to the Issue/Offer shall not be associated company or associated undertaking of the issuing
company/the Offeror.
26. 25 copies of draft full Prospectus / Offer for Sale / Information Memorandum draft abridged prospectus and
advertisement, if any, with last page signed in original by directors of the Company or the Offeror, as the case may be.
27. 25 copies of audited annual accounts of the company for the last 5 years and its latest half yearly and quarterly
accounts, if any or for a shorter period if five years of the commencement of business are not completed.
28. A List of employees, who have been allocated shares out of the present issue along with their full particulars i.e.,
names, addresses and number of shares offered to each of them;
29. In issues where premium is to be charged from public, the shares allocated to any person on account of preferential
allocation at par shall not be saleable for a period of two years from the date of public subscription. Such shares shall
be deposited in a Blocked Account with a depository company and their deposit shall be certified by the depository
company. The particulars of these shares shall be furnished to the Stock Exchange. Provided that charges of opening
and operating of the said Blocked Account with the depository company shall be borne by the holder of such shares.
30. Copy of application submitted with CDC for declaration of such company as CDC eligible security.
31. Report of State Bank of Pakistan that the names of promoters/sponsors/controlling directors of the company are not in
the defaulter’s list of State Bank of Pakistan (SBP) either in their individual capacity or in the capacity of directors of
other companies. (This will not apply to nominee directors of the Government and Financial Institution.
32. Report of State Bank of Pakistan that the name of the company as well as the names of other companies in which
directors of the company are holding directorship are not in the defaulter’s list of SBP.
33. Printed copy of share certificate duly cancelled.
34. Any other document/material/information as may be required by the Exchange for its own record or for inclusion in the
prospectus/offer for sale document/Information memorandum. Names of controlling directors.
35. Copy of the Memorandum and Articles of Association of the company and, in case of debentures, a copy of the trust
deed.
36. Copies of prospectus issued by the company in respect of any security already listed on the Stock Exchange.
37. A brief history of the company since incorporation giving details of its activities including any re-organization, changes
in its capital structure and borrowings.
38. A statement showing:
(a) cash dividends and bonuses paid during the last 10 years or such shorter period as the company may have been
in existence.
(b) dividends or interest in arrears, if any.
39. Certified copies of agreements or other documents relating to arrangements with or between:
(a) vendors and/or Sponsors
(b) underwriters
(c) brokers
40. Certified copies of agreements with:
(a) managing agents.
(b) selling agents.
(c) Managing Director and technical directors.
41. Certified copies of the agreements with the NIT, ICP, PICIC, IDBP and any other financial institution.
42. A statement containing particulars, dates of and parties to all material contracts, agreements (including agreements for
technical advice and collaboration), concessions and similar other documents except those entered into in the normal
course of the company’s business or intended business together with a brief description of the terms of such
agreements.
43. Names and addresses of the directors and persons holding ten per cent or more of any class of equity security as on
the date of application together with the number of share or debentures held by each of them.
44. Particulars of the security listing of which is sought.
45. In case of Equity-Based Project:
(i) Certificate from the auditors that the fixed capital expenditure is entirely financed by equity and that the capital
allocated to sponsors, foreign and local investors, if any, has been fully paid.
(ii) Project appraisal report from a financial institution or a commercial bank or an investment bank.
(iii) Certificate from the auditors that the land for the project has been acquired, transferred/registered in the name of
company, letters of credit have been established and shipment schedule of plant and machinery has been
finalized by the suppliers.
(iv) Undertaking on Non-Judicial Stamp Paper from the Sponsors that they shall retain at least twenty-five per cent of
the capital of the company for a period of five years from the date of public subscription.
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(v) Underwriting arrangement in the manner as prescribed in sub rule (II) (iv) of rule 3 of the Companies (Issue of
Capital) Rules, 1996.
46. In case of Loan-based Project:
(i) Auditors’ certificate that sponsors’ subscription has been received in full and at least 80% thereof has been utilized
in the project.
(ii) Auditors’ certificate that at least 30% of the plant and machinery has been installed and last consignment of plant
and machinery, where required has been shipped to the company.
(iii) Undertaking on Non-Judicial Stamp Paper from the Sponsors that they shall at all times retain at least 25% of the
capital of the company.
Notes:
i)
ii)
Please note that copies of all the documents are certified by the Company Secretary/CEO.
Please note that all documents relating to regulatory authority are duly certified from the concerned Company
Registration Office or concerned Regulatory Authority.
iii) Please note that in addition to the above-mentioned documents, the following shall be also be submitted:
a) Soft copy of the draft prospectus / offer for sale document;
b) Scanned copy of the Memorandum & Articles of Association; and
c) Scanned copy of the audited annual accounts of the company for the last 5 years or for a shorter period if five
years of the commencement of business are not completed and its latest half yearly and quarterly accounts.
Page 54 of 192
Karachi Stock Exchange Regulations
FORM I
FORM OF APPLICATION FOR LISTING A SECURITY ON A STOCK EXCHANGE UNDER REGULATION 5.2.
To:
The General Manager
Karachi Stock Exchange Limited
Karachi.
Dear Sir,
1.
We hereby apply for the listing of our _____________________________________ on your Stock Exchange.
(Name of company)
2.
Necessary information and documents as required under Regulation 5.2.2.(a) are enclosed herewith.
Yours faithfully,
______________________
SIGNATURE & ADDRESS
c.c. to:
The SECP
ISLAMABAD as required under Sub-Section (1) of Section 9
of the Securities & Exchange Ordinance, 1969
Page 55 of 192
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FORM II
FORM OF UNCONDITIONAL UNDERTAKING UNDER
REGULATION NO. 5.3. ON NON-JUDICIAL STAMP PAPER OF RS.20/Dated: _______________
The Board of Directors
Karachi Stock Exchange Limited
KARACHI.
UNDERTAKING
We undertake, unconditionally, to abide by the Listing Regulations of the Karachi Stock Exchange Limited which
presently are, or hereinafter may be in force.
We further undertake:
(1) That our shares and securities shall be quoted on the Ready Quotation Board and/or the Futures Counter at the
discretion of the Exchange;
(2) That the Exchange shall not be bound by our request to remove the shares or securities from the Ready
Quotation Board and/or the Futures Counter;
(3) That the Exchange shall have the right, at any time to suspend or remove the said shares or securities for any
reason which the Exchange consider sufficient in public interest;
(4) That such provisions in the articles of association of our company or in any declaration or agreement relating to
any other security as are or otherwise not deemed by the Exchange to be in conformity with the Listing
Regulations of the Exchange shall, upon being called upon by the Exchange, be amended to supersede the
articles of association of our company or the nominee relating to the other securities to the extent indicated by the
Exchange for purposes of amendment and we shall not raise any objection in relation to a direction by the
Exchange for such amendment; and
(5) That our company and/or the security may be delisted by the Exchange in the event of non-compliance and
breach of this undertaking.
Yours faithfully
(Signature of Authorized Person) Common Seal of the Company
Page 56 of 192
Karachi Stock Exchange Regulations
FORM III
Dated: ________________
To:
The General Manager
Karachi Stock Exchange Limited
Stock Exchange Building
Stock Exchange Road
KARACHI.
UNDERTAKING
We, M/s_______________________________________________________ have applied for Listing of our Company
on your Exchange. In case our application is approved, we hereby undertake as under:(1) That we will issue shares either in scripless form in the Central Depository System (CDS) or in the shape of
physical scrip along with computerized transfer deeds on the basis of option exercised by the successful
applicants within 30 days from the date of close of public subscription.
(2) That shares in the physical scrip shall be dispatched through the bankers to the issue whereas scripless shares
shall be directly credited through book entry into the respective CDC accounts of the allottees maintained with
Central Depository Company of Pakistan Limited (CDC).
(3) That we will arrange to verify the signature on Transfer Deeds in Karachi atleast for a period of 30 days after
Official Listing of our Company.
(4) That we will return the Transfer Deeds duly verified within 48 hours Lodged for verification of signatures.
______________________________
MANAGING DIRECTOR/CHIEF EXECUTIVE
Page 57 of 192
Karachi Stock Exchange Regulations
FORM IV
The General Manager
Karachi Stock Exchange Limited
Stock Exchange Building
Stock Exchange Road
KARACHI.
Dear Sir,
Re: NO OBJECTION CERTIFICATE
We the undersigned have entered into an Underwriting Agreement with M/s._________________________
on___________________________. The terms of which are as follows:
i) Total Number of Shares Underwritten
_______________________
ii) Face Value
Rs.___________ per share
iii)Premium Value (if any)
Rs.___________ per share
iv) Total Value (Including Premium)
Rs.___________ per share
v) Amount of Underwriting
Rs.___________
vi) Underwriting Commission
______________%
vii)
Take-up Commission
viii)
______________
The
Underwriting
______________%
Agreement
is
Valid
Upto
We have no objection for offering of shares to the general public and publication of Prospectus/Offer For Sale of the
company in the newspapers.
We further confirm that we have not entered into any buy back or repurchase agreement in respect of the shares
underwritten with the sponsors or any other person under the said agreement.
Yours truly,
___________________________________
Name and Designation of the Underwriter
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Appendix-2
ISSUE/OFFER OF SHARES THROUGH BOOK BUILDING
1.
Eligibility:
A public limited company or a body corporate which intends to issue shares to the general public under Section 57
of the Companies Ordinance, 1984 and makes an application to a stock exchange for listing of its shares or an
Offeror who intends to offer shares under Section 62 of the Companies Ordinance, 1984 and makes an application
to a stock exchange for listing of such shares, where applicable, and is in compliance with Listing Regulations of the
stock exchange, is eligible to issue/offer its shares through Book Building mechanism.
2.
Offer through Book Building:
A Company or a body corporate or an Offeror, which fulfills the eligibility criteria mentioned in clause 1 above, may
subject to the requirements specified under this appendix of the Regulations, offer shares through Book Building
process subject to the following conditions:
3.
(a)
not more than 75% of the total offer shall be allocated for offer through book building process to institutional
investors and HNWI; and
(b)
not less than 25% of the total offer shall be allocated for offer to the general public.
Procedure of Issue/Offer under Book Building Process:
3.1
The Issuer or Offeror, as the case may be, proposing to offer shares to the Institutional Investors and HNWI through
the book building process shall appoint a Lead Manager (LM) and a Book Runner (BR). An Issuer / Offeror need not
to appoint a LM, if so desired by it, provided such Issuer / Offeror is eligible to act as LM under this appendix of the
Regulations. Nothing in this appendix of the Regulations shall restrict an Issuer / Offeror to appoint a single person
as Book Runner and Lead Manager or to appoint more than one Book Runner or Lead Manager.
Provided that BR shall not be an associated company or an associated undertaking of the Issuer/ Offeror.
3.2
The Issuer/Offeror in consultation with LM and BR shall issue a preliminary prospectus to selected Institutional
Investors and HNWIs.
Apart from meeting the disclosure requirements as specified under various clauses of this appendix of the
Regulations and under various provisions of the Companies Ordinance, 1984, the following disclosures shall be
suitably made in the preliminary prospectus:
(i)
The particulars of LM, BR, the share registrars and the bankers to the issue/offer etc.;
(ii)
Role and functions of LM and BR;
(iii)
The following accounting ratios, shall be given in a separate para under the heading “Financial Ratios” for
each of the accounting periods for which the financial information is given:
a.
b.
c.
d.
EPS, where applicable, as adjusted for changes in capital;
P/E ratio, where applicable;
Break-up value per share / Net-Asset value per share;
Return on Assets and Average return on net-worth in the last five years (where applicable);
Note: The accounting ratios disclosed in the prospectus should be calculated after giving effect to the
consequent increase of capital on account of compulsory conversions outstanding, as well as on the
assumption that the options outstanding, if any, to subscribe for additional capital shall be exercised.
(iv)
The dates and time of opening and closing of the bidding period;
(v)
The method and process of bidding;
(vi)
Mechanism for determination of the strike price containing illustration, for easy understanding, based on
hypothetical data;
(vii)
Basis of allotment of shares out of Book Building offer;
(viii)
The addresses of the bid collection centers;
(ix)
Separate statements by both the Issuer/Offeror and LM confirming that all the material information as
required under the Companies Ordinance, 1984 and this appendix of the Regulations have been disclosed in
the prospectus and that whatever stated in the prospectus and the supporting documents is true and correct
to the best of their knowledge and belief and that nothing has been concealed;
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(x)
The floor price and justification for the same in case it is higher than the face value of the share.
3.3
The preliminary prospectus/offer for sale document shall, after clearance by the stock exchange(s), be submitted to
the Commission for approval under Section 57 or Section 62 of the Companies Ordinance, 1984 as the case may
be;
3.4
After approval of the preliminary prospectus/offer for sale document by the Commission, the issuer/Offeror shall
seek approval of the Exchange for allocation of dates for the Bidding Period;
3.5
Copy of the preliminary prospectus approved by the Commission shall be circulated by the Issuer/Offeror through
LM and BR to the prospective institutional investors and HNWI and shall also be placed on the websites of the
Issuer/Offeror, LM and BR;
3.6
In addition to circulation of the preliminary prospectus in the manner as mentioned in para 3.5 above, an
advertisement, approved by the Commission, shall be published at least in one Urdu and one English daily
Newspaper having wide circulation in the federal and all the provincial capitals, inviting the institutional investors and
HNWI to participate in the bidding;
3.7
After approval of the preliminary prospectus by the Commission, LM and BR may jointly conduct awareness
campaigns like advertisement, road shows, presentations, meetings etc.;
Note: The Issuer/Offeror shall obtain prior approval of the Commission for issue, circulation and publication of
advertisement, if any, regarding the issue/offer of shares.
3.8
The electronic system/software used by BR in the book building process may be subject to audit/examination by the
Commission directly, through other persons appointed by the Commission for this purpose or through an external
auditor appointed by the stock exchange on the directions of the Commission;
3.9
LM and BR shall be entitled to remuneration for arranging and conducting the Book Building process and all the
expenses including remuneration of LM and BR shall be disclosed in the preliminary prospectus; and
3.10
In case the Issuer/Offeror does not receive bids for the minimum number of shares offered at floor price or in the
absence of the floor price, at any other price acceptable to the Issuer/Offeror, it may withdraw the offer. The decision
of withdrawal shall be taken within a period not more than three working days of the closing of the bidding period.
The withdrawal shall be immediately intimated to the Commission and the Exchange;
In such a case the Issuer/Offeror shall refund the margin money to the bidders within three working days of the
decision of withdrawal.
3.11
4.
An associated person or any other related person or party of the Issuer / Offeror, as the case may be, shall not make
bid(s) for shares in excess of 5% of the book building portion of the issue/offer.
Main Parties to the Issue/Offer and their role & responsibilities:
4.1
The Issuer/Offeror:
The Issuer/Offeror shall be responsible to;
(i)
appoint LM, save as provided in para 3.1, and BR;
(ii)
ensure that BR has adequate infrastructure to properly undertake and perform book building process on its
behalf;
(iii)
obtain all approvals/consents/NOCs/clearance relating to the issue/offer;
(iv)
ensure that all disclosures as required under the Companies Ordinance, 1984 and this appendix of the
Regulations have been made in the prospectus;
(v)
ensure that all the documents required by the Commission to be submitted along with the application under
Section 57 or 62, as the case may be, have been provided. In case certain documents are to be provided
later on, list of all such documents and reason for its late submission should be provided in the application
under Section 57 or 62 as the case may be;
(vi)
ensure that whatever stated in the prospectus and the supporting documents is true and correct to the best of
their knowledge and belief and that nothing has been concealed;
(vii)
submit final report about issue/circulation/publication of the prospectus, subscription received, strike price
discovered, basis of allotment, refund made and related matters within 30 days of the last date for public
subscription to the Commission; and
(viii)
maintain record of the issue/offer, based on book building process, for a period of at least three years from
the date of closing of book building process.
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4.2
The Lead Manager:
The Lead Manager to the issue/offer shall be responsible to:
4.3
(i)
conduct awareness campaigns like presentations, meetings, road shows etc. jointly with BR;
(ii)
ensure that all disclosures as required under the Companies Ordinance, 1984 and this appendix of the
Regulations have been made in the prospectus;
(iii)
ensure that necessary infrastructure and electronic system/software is available to collect bids and to carry
out book building process in a fair, efficient and transparent manner;
(iv)
obtain, on behalf of the Issuer/Offeror, all approvals/consents/NOCs relating to the issue/offer.
The Book Runner:
The Book Runner to the issue/offer shall be responsible to:
5.
(i)
conduct awareness campaigns like presentations, meetings, road shows etc. jointly with LM;
(ii)
arrange and ensure that necessary infrastructure and electronic system/software is available to collect bids
and to carry out book building process in a fair, efficient and transparent manner;
(iii)
collect bid applications and applications’ money, security, margin as the case may be from the Institutional
Investors and HNWI in the manner as mentioned in this appendix of the Regulations;
(iv)
put serial number, date and time on each bidding form at the time of collection of the same from the bidders;
(v)
vet the bidding applications;
(vi)
build an order book showing demand for the shares at various prices;
(vii)
discover the strike price at the close of the bidding period;
(viii)
enter into underwriting agreement with the Issuer/Offeror; and
(ix)
maintain record of the bids received for subscription of the shares;
(x)
The Book Runner to the issue / offer shall be required to use the software for Book Building Process provided
by the Exchange, which is based on Dutch Auction Methodology for display of the order book and
determination of the strike price, on the terms and conditions as may be agreed in writing between the
Exchange and the Book Runner;
(xi)
The Book Runner to an issue / offer for information of the investors shall, in addition to live display of the
order book on the website of the Exchange, also live display the same order book simultaneously on its own
website till closing of the bidding period.”
Underwriting:
The offering of shares through book building should be compulsorily underwritten in the following manner:
6.
(a)
BR shall enter into an underwriting agreement with the Issuer/Offeror stating that BR has underwritten the
entire Book Building portion at the Strike price. The Underwriting Agreement should also disclose the number
of shares underwritten, the rate and amount of the underwriting Commission/Fee to be paid to BR;
(b)
the Book Building Offer shall be underwritten within 2 working days of the closing of bidding period; and
(c)
In the event, a bidder backs out of his commitment, BR shall, save as provided in para 3.10, be responsible
for subscribing to the amount involved.
Publication of the Final Prospectus:
On finalization of the underwriting arrangement LM shall, within ten working days of the closing of bidding period,
shall submit application to the Stock Exchange(s) concerned for allocation of dates for publication of the final
prospectus and subscription of shares by the general public.
The final prospectus in full or in abridged form must be published within seventeen working days of the closing of the
bidding period in the manner as specified in Section 53 of the Companies Ordinance, 1984.
Public subscription for the shares shall be held at any date(s) within thirty days of the publication of the final
prospectus but not earlier than seven days of such publication.
7.
Bidding Form:
7.1
Standardized bidding forms shall be prescribed by the BR;
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8.
7.2
Bids shall be submitted through the Bid Collection Centers on the standard bidding form duly filled in and signed in
duplicate;
7.3
The bidding form shall be serially numbered at the bid collection centers and date and time stamped, at the time of
collection of the same from the bidders;
7.4
The serial number may be system generated or stamped with an automatic numbering machine;
7.5
The bidding form shall be issued in duplicate signed by the investor and countersigned by the BR, with first copy for
BR, and the second copy for the investor;
7.6
The identities of the investors participating in the bidding process shall not be made public.
Procedure for bidding:
8.1
The method and process of bidding shall be subject to the following:
8.1.1 Bids can be at a ‘limit price’ or at ‘strike order’ or can be a ‘step bid’.
Provided that the minimum size of a limit bid shall be Rs.1,000,000 and in case of a step bid, the amount of
any step shall not be less than Rs.250,000/-.;
8.1.2 The institutional investors and HNWI shall place their bids through BR who shall vet the bid forms;
8.1.3 The institutional investors and HNWI shall have the right to revise or withdraw their bids during the bidding
period;
8.1.4 The institutional investors and HNWI shall not make more than one bids.
8.2
The BR shall collect an amount to the extent of 100% of the application money as margin money in respect of bids
placed by HNWI;
8.3
The BR shall collect an amount of not less than 25% of the application money as margin money in respect of bids
placed by institutional investors;
8.4
BR may reject a bid placed by an institutional investors and/or HNWI for reasons to be recorded in writing and the
reasons should be disclosed to such bidder forthwith. Decision of BR shall not be challengeable by the bidder or its
associates;
8.5
BR shall maintain record of the bids received for bidding of the shares;
8.6
BR shall ensure that all the bids received by the bid collection centers are entered into the system developed by the
Exchange for the purpose of book building. BR shall not accept any bid after 5:00 p.m. during the days of the bidding
period, except the last day when no fresh bid(s) shall be collected after 5:00 p.m. and the bid(s) collected thus far,
shall be required to be entered into the System by 7:00 p.m. on the same day and thereafter no bid shall be entered
into the system or be revised in any way and for any reason even if the bid application has been received from the
investors. Online revision of the bids shall be allowed to the bidders through system software. This will however be
subject to the condition that the bidder shall comply with the requirements of bidding as disclosed under Clause 8 of
this Appendix and / or any other condition / procedure disclosed in the offering document. The Exchange shall
display live an order book showing the demand for shares at various prices and the accumulated number of shares
bid for along-with percentage of the total shares offered. The order book should also show the revised bids and the
bids withdrawn;
8.7
No extension shall be allowed in book building period, except under the extra ordinary circumstances like law and
order situation resulting closure of banks etc. Such extension shall be allowed by the Exchange with the prior written
approval of the Commission;
8.8
BR shall approach and circulate the preliminary prospectus to a maximum number of the institutional investors and
HNWI, but not less than ten in each category, inviting them for participation in the bidding process;
8.9
At the close of the bidding period, the Issuer/Offeror, in consultation with LM, if any, and BR shall determine the
strike price on the basis of “Dutch Auction Method”. Under this Methodology, the strike price is determined by
lowering the price to the extent that the total number of shares that the Issuer/Offeror intends to issue or to divest
through the Book Building process is subscribed. While determining the strike price, the bids placed through strike
order(s) shall not be taken into consideration.
The order book shall display the bid prices in a descending order along with the quantity for each price level as well
as the cumulative quantity at each price level. The strike orders shall be displayed in the order book in the following
manner:
(a) after the lowest limit bid, in case the limit bids placed are not sufficient for full allotment of the shares offered; or
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(b) after the limit bid at which all the shares offered can be allotted, in case the limit bids placed are sufficient for
full allotment of the shares offered.
For the purpose of allotment of shares, the limit bid(s) entered at the price determined/discovered as Strike Price
through book building process, and the bids placed as strike order shall be ranked equally and preference will be
given to the bidder who has made the bid earlier.
Once the strike price is determined all those bidders whose bids have been found successful shall become entitled
for allotment of shares. The bidders, who have made bids at prices above the strike price, will be issued shares at
the strike price and the differential will be refunded. The bidders, who have made bids below the strike price, shall
not qualify for allotment of shares and their margin money will be refunded;
9.
8.10
The offer price to general public shall be equal to or at a discount to the strike price;
8.11
Successful bidders shall be intimated, within two working days of the closing of the bidding period, the strike price
and the number of shares provisionally allotted to each of them. The successful institutional bidders shall, within
seven working days of the closing of the bidding period, deposit the balance amount as consideration against
allotment of shares. Where a successful bidder defaults in payment of shares allotted to him, the margin money
deposited by such bidder shall be forfeited to the BR;
8.12
Margin money of the unsuccessful bidders shall be refunded within three working days of the close of the bidding
period;
8.13
The Issuer/Offeror shall open two separate bank accounts for collection of applications’ money, one each for the
Book Building offer and the Public Issue/ offer;
8.14
Final allotment of shares out of the Book Building Offer shall be made after receipt of full subscription money from
the successful bidders; however, shares to such bidders shall be issued/ transferred at the time of issuance/transfer
of shares out of the Public Issue/ Offer to the successful applicants;
8.15
The Book Building process will be considered as withdrawn if the total number of bids received is less than 15;
8.16
The successful bidders shall be issued shares, which are allocated to them as a result of book-building process, in
the form of book-entry securities to be credited in their CDS accounts. All the institutional investors and HNWI shall,
therefore, provide their CDC account numbers in the bid application.
Restriction on provisional listing
The company whose shares are issued / offered through Book Building shall not be provisionally listed.
10. Maintenance of Books and Record:
10.1
The Issuer/Offeror, LM, BR and other intermediaries associated with the issue/offer of shares shall maintain record
of the issue/offer for a period of at least three years from the closing of the public subscription list; and
10.2
The Commission shall have the right to call such information/documents as it deems fit from the Issuer/Offeror, LM,
BR and other intermediaries associated with the issue/offer. The Commission may also inspect such records and
books which are maintained by the Issuer/Offeror, LM, BR and other intermediaries involved in the issue/offer.
11. Relaxation:
Where the Exchange is satisfied that it is not practicable to comply with any of the requirement(s) specified in this
appendix of the Regulations, in a particular case or class of cases, the Exchange may, for reason(s) to be recorded,
relax such requirement(s) subject to such conditions as it may deem fit, with the approval of the Commission.
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Chapter 5A: REGULATIONS GOVERNING LISTING AND TRADING OF EQUITY SECURITIES OF
SMALL AND MEDIUM ENTERPRISES (SMEs)
5A.1.
DEFINITIONS:
5A.1.1. In this chapter, unless the subject or context otherwise requires:
"Bid Price" means the price a Market Maker is willing to pay for the purchase of equity securities of an SME;
"Fund Management Company" means the same as defined in the Private Equity and Venture Capital Fund
Regulations, 2008;
(c) "High Net Worth Individual Investor (HNWI)" means an individual investor who applies or bids for shares of the value
of rupees one million or above;
(d) "Information Memorandum" means a document outlining the salient features, risks and terms of equity securities
offered/issued to QIBs and HNWIs through private placement;
(e) "Market Advisor", for the purpose of this chapter, includes:
(i) a Corporate Brokerage House;
(ii) a commercial bank;
(iii) a financial institution as defined in sub-section (15A) of section 2 of the Companies Ordinance, 1984; or
(iv) any other institution approved by the Exchange;`
(a)
(b)
"Market Maker" has the same meaning as defined in chapter 12 of the KSE Regulations relating to the Market
Makers Regulations;
(g) "Market Making" means the continuous tender of two-way quotes by a Market Maker i.e. Bid Price and Offer Price
for the purchase and sale of the equity securities of an SME;
(h) "Offer Price" means the price a Market Maker is willing to receive for the sale of the equity securities of an SME;
(i) "Qualified Institutional Buyers (QIBs)" for the purpose of these regulations means:
(f)
(i)
Any of the following entity:
a. a banking company as defined in the Banking Companies Ordinance,1962.
b. a financial institution as referred to in Section 3A of the Banking Companies Ordinance, 1962.
c.
an investment company as defined in the Non-Banking Companies (Establishment and Regulation) Rules,
2003.
d. a company as referred to in Section 503 of the Companies Ordinance, 1984.
e.
a company registered with the Commission as broker under the Brokers and Agents Registration Rules,
2001.
f.
a Fund Management Company.
g.
a fund established under the Collective Investment Scheme under the Non-Banking Companies
(Establishment and Regulation) Rules 2003.
h. a trust established by a deed under the provisions of the Trust Act, 1882.
i.
an employees' provident fund governed by the Employees' Provident Fund (Investment in Listed Securities)
Rules, 1996.
j.
a pension fund as defined in the Voluntary Pension System Rules, 2005.
(ii) Any corporate body established by Federal Government, Provincial Government and/or Local Authority.
(iii) Any other entity as allowed based on the criteria prescribed by the Exchange with prior approval of the
Commission.
"Small and Medium Sized Enterprise (SME)" means a public company, registered under the Companies Ordinance,
1984, having a post issue paid up capital not less than Rs. 25 million and not more than Rs. 200 million;
(k) "SME Board" means the board developed by the Exchange for listing and trading of equity securities of SMEs;
(l)
"Spread" means the difference between the Offer Price and the Bid Price of an equity security to be quoted by a
Market Maker.
(j)
5A.1.2. Words and expressions used but not defined in this chapter shall, unless there is anything repugnant in the subject or
context, have the same meanings as are assigned to them in the Companies Ordinance, 1984 and the Securities and
Exchange Ordinance, 1969.
5A.2.
ELIGIBILITY CRITERIA FOR LISTING OF EQUITY SECURITIES OF SMEs:
An SME shall be eligible to apply for listing of its equity securities under this chapter provided that:
(a)
(b)
(c)
(d)
(e)
(f)
the Memorandum and Articles of Association of the SME authorize it to list its equity securities/raise capital
on/through stock exchanges;
not less than 20% of the post issue paid-up capital of the SME is offered only to QIBs and HNWIs entirely through
private placement by circulation of Information Memorandum;
the offer is made through fixed price method, the book building method or any other method acceptable to the
Exchange;
the number of initial subscribers in private placement is not less than five (05);
the bid size for each initial subscriber is not less than rupees one million;
its sponsors hold not less than 25% of post issue paid up capital of the SME for a lock-in period of not less than
three years;
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(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
5A.3.
its sponsors retain their entire shareholding in SME and subsequent right and bonus shares issued thereon for a
lock-in period of not less than twelve months. However, any withdrawal or sale of shares in excess of 25% thereafter
shall only be allowed with prior written permission of the Exchange.
For the purpose of definitions (f) and (g) above, the lock-in periods shall start from the date of listing of the SME or
from the date of commencement of commercial operation or production by the SME whichever is later, or till such
additional period as may be specified by the Exchange;
the equity securities to be listed are issued only in Book-Entry form through CDS and this information is disclosed in
Information Memorandum;
it has appointed at least one Market Advisor to perform functions in accordance with this chapter;
It has developed its own website and disseminated the basic information about the SME and its business activities
including the Information Memorandum, its annual and half-yearly financial statements and quarterly financial
highlights;
The promoters sponsors/controlling directors are not also promoters/sponsors/controlling directors in other listed
companies, which are in default of any Listing Regulation of the Exchange. Further, no person shall be allowed to
act as sponsor/controlling director of a company which was delisted during last five years and non-compliant of any
Listing Regulation at the time of its delisting. However, this will not apply to nominee directors of the Government
and Financial Institutions. The company shall also provide a list of Controlling Directors;
The company is not an associated company of any other listed company which has violated the Listing Regulations
of the Exchange and is still in default of any Listing Regulation. However, this will not apply to nominee directors of
the Government and Financial Institutions;
its Chief Executive has not served or is not serving as Chief Executive of a listed company which has significantly
violated and/or failed to comply with any provision of chapter 5 relating to "Listing of Companies and Securities
Regulations" during his tenure as the Chief Executive; and
its Promoters/sponsors/controlling directors are not in the defaulters list of the State Bank of Pakistan either in their
individual capacity or in the capacity as directors of other listed companies. This will not apply to the directors
nominated by the Federal Government or any Provincial Government and the Financial Institutions.
ISSUE OF EQUITY SECURITIES AT PREMIUM:
An SME may issue its equity securities at premium subject to the following conditions:
(a) The SME has commenced commercial operations and based on its latest audited financial statements for not less
than twelve months, it has earned:
(i) profit from its principal operations; and
(ii) positive earnings per share.
(b) The premium on offer to QIBs and HNWIs shall not exceed the amount of premium charged on placements with
foreign or local Investors/institutions, if such placement has been made within a period of six months preceding the
commencement of the subscription period for QIBs and HNWIs and the names and addresses of such
Investors/institutions shall be disclosed in Information Memorandum;
(c) The SME shall justify the amount of premium and such justification shall be disclosed in the Information
Memorandum;
(d) The sub-clauses (a) and (b) shall not apply where the equity securities are issued/offered through book building
process.
5A.4.
LISTING PROCEDURE:
5A.4.1.
An SME that fulfils the eligibility criteria specified in clause 5A.2. may apply for listing of its equity securities on the SME
Board by making an application to the Exchange on Form-I attached to this chapter accompanied with such information
and documents as mentioned at Annexure-I to Form-I along with payment of initial listing fee as prescribed under this
chapter.
5A.4.2. The Exchange may reject a listing application, at its sole discretion if it deems that listing of the SME is not in the interest
of the market or the SME does not meet any of the eligibility criteria prescribed above.
Provided that the SME shall be given an opportunity of hearing by the Exchange before the listing application is rejected.
5A.5.
CONTENTS OF INFORMATION MEMORANDUM:
5A.5.1. The Information Memorandum, to be circulated to QIBs and HNWIs for issuance/offer of equity securities of an SME,
shall contain at least such information as provided in Schedule-I of this chapter.
5A.5.2. The Exchange and the SME shall place the Information Memorandum on their websites.
5A.5.3. The SME shall not use the Information Memorandum as a document inviting the general public
for subscription of equity securities and shall include a statement to this effect on the cover page of the Information
Memorandum.
5A.6.
APPOINTMENT AND DUTIES OF MARKET ADVISOR:
Prior to applying for listing on the Exchange, the SME shall, through an agreement in writing, appoint a Market Advisor
which shall perform the following duties:
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The Market Advisor shall appraise the SME and its project, either on his own or in consultation with other market
expert(s), and include in the feasibility report that the Market Advisor:
(i) has examined the technical, managerial, commercial, economic and financial aspects of the project and/or the SME;
(ii) has reviewed all the material contracts/agreements relating to issue/offer of equity securities by the SME;
(iii) has reviewed all the contents of the Information Memorandum and found them true and complete to the best of its
(iv)
(v)
(vi)
(vii)
(viii)
5A.7.
knowledge and belief;
is satisfied that the SME has or will have the necessary operational infrastructure to carry out its business;
is satisfied that the SME and its project are viable and investment worthy;
has ensured and will continue to ensure that the SME complies with the obligations under this chapter at all times;
shall act honestly, impartially and with due care and skill at all times; and
shall comply with the applicable regulatory and contractual obligations at all times.
RESIGNATION OF MARKET ADVISOR:
A Market Advisor of a listed SME may resign after three months of commencement of its term by providing the Exchange
at least two months' prior written notice along with the reasons for resignation and specifying the effective date of
resignation, provided that a substitute Market Advisor acceptable to the Exchange is ready to take the outgoing Market
Advisor's role and responsibilities.
5A.8.
APPOINTMENT AND FUNCTIONS OF MARKET MAKERS:
5A.8.1. APPOINTMENT OF MARKET MAKER:
The SME may, through an agreement in writing, appoint a Market Maker for a period of not less than three years from
the date of listing of the SME.
In case a Market Maker is not available at any time or discontinues to act as Market Maker upon completion of initial
period of three years or due to any reason, the SME may immediately appoint another person eligible to act as Market
Maker and shall notify the same to the Exchange and through its website on the same day.
5A.8.2.
FUNCTIONS OF MARKET MAKER:
The Market Maker shall be responsible for performing the following functions:
(i)
The Market Maker shall provide two-way quotes in all equities securities of SMEs for which it is appointed as a
Market Maker.
(ii)
The Market Maker shall not quote beyond the maximum Spread of 10% which shall be disclosed in the Information
Memorandum.
(iii) Market Maker shall hold a minimum inventory per security equivalent to 5% of free float of the security.
(iv) Market Maker shall purchase or arrange purchase of the equity securities of respective SME from any holder that
tenders such equity securities for sale.
(v)
5A.9.
5A.9.1.
5A.9.2.
Market Maker shall sale or arrange sale of the equity securities of respective SME to any Investor who intends to
purchase such securities.
TRADING OF SECURITIES ON EXCHANGE, RISK MANAGEMENT AND ALLIED MATTERS:
TRADING THROUGH KATS:
(i)
Any Broker can trade under SME Board either on his own account or on account of his clients subject to prior
notification in writing to the Exchange and payment of basic deposit as per Deposits, Fee, Contribution and other
Sums Schedule.
(ii)
Trading in SME Board shall take place through KATS.
MINIMUM ORDER SIZE (MARKETABLE LOT):
The minimum order size for trading in equity securities of SME on the Exchange shall be Rs. 100,000/-
5A.9.3.
5A.9.4.
CIRCUIT BREAKERS OR MARKET HALT:
(i)
There shall be a security-wise circuit breaker or market halt in SME Board in a manner as may be prescribed by the
Exchange from time to time.
(ii)
No trade in any equity security of an SME shall be allowed beyond the above prescribed upper and lower limits.
MINIMUM FREE FLOAT:
The SME shall maintain at all times the minimum Free Float of 20% of its post issue paid up capital.
5A 9.5.
EXPOSURE MARGINS:
Exposure margin on equity security of an SME shall be 25% or VaR, whichever is lower, of the total Exposure.
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5A.9.6.
TRADING FEE (LAGA):
The Exchange shall prescribe, from time to time, trading fee on the value of the transaction and other
contribution/charges payable by the Broker. However, there shall be no trading fee for 1 year from the applicability of this
chapter.
5A.9.7.
CLEARING AND SETTLEMENT:
Clearing and settlement of the transactions executed at the SME Board shall be done under T+2 settlement system
through the NCCPL.
5A.9.8.
PROHIBITION OF SHORT SALE AND BLANK SALE:
Short Sale and Blank sale of equity securities of SMEs shall not be permissible.
5A.10. NON-APPLICABILITY OF THE LISTING OF COMPANIES AND SECURITIES REGULATIONS OF THE EXCHANGE:
An SME listed under this chapter shall not be subject to compliance with the provisions of chapter 5 relating to "Listing of
Companies and Securities Regulations" of the KSE Regulations including the Code of Corporate Governance (CCG).
The SME shall be required to disclose this fact in the Information Memorandum and all the subsequent annual and halfyearly financial reports.
5A.11. APPLICABILITY OF SUBSTANTIAL ACQUISITION LAWS:
5A.11.1. Any person who, directly or indirectly, intends to acquire voting shares of an SME, shall be subject to compliance with
the provisions of the Listed Companies (Substantial Acquisition of Voting Shares and Take-overs) Ordinance 2002 and
with all the relevant requirements laid therein including the requirements laid in the Listed Companies (Substantial
Acquisition of Voting Shares and Takeovers) Regulations, 2008.
5A.11.2. An acquirer who acquires voting shares, which (taken together with voting shares, if any, held by the acquirer) would
entitle the acquirer 5% or more voting shares of the SME shall disclose the aggregate of his holdings in that SME to the
Commission and Exchange within two working days of acquisition of voting shares.
5A.12. AUDITED FINANCIAL STATEMENTS AND INFORMATION REQUIREMENT:
5A.12.1.
The SME shall prepare its periodic financial statements as required under the applicable laws and shall get the same
audited by a QCR rated chartered accountant.
5A.12.2. The SME shall, within one month of close of each period, place annual financial statements, half yearly financial
statements and quarterly financial highlights on its website. The SME shall also immediately notify the Exchange about
the placement of such information on its website.
5A.13. REPORTING AND DISCLOSURE BY SME:
An SME listed under this Chapter shall be required to disseminate the following information:
(a)
DISCLOSURE OF PRICE SENSITIVE INFORMATION:
Every listed SME shall communicate to the Exchange any non-public material information about the SME such as all
decisions of its Board of Directors relating to cash dividend, bonus issue, right issue or any other entitlement or corporate
action, change of management, significant change in its financial condition, sphere of activity and current and expected
business performance or any other price-sensitive non-public information which if made public will likely cause a
substantial change in the market price of its equity securities. Such information must be notified without delay to the
Exchange according to the procedure laid down in the Exchange’s Correspondence Manual.
(b)
DISCLOSURE OF RELATED PARTY TRANSACTIONS:
Every listed SME shall communicate to the Exchange all related party transaction, without delay as soon as the terms of
a transaction with a related party are agreed, according to the procedure laid down in the Exchange’s Correspondence
Manual. Such information should including the following:
(i)
(ii)
(iii)
(iv)
(v)
(c)
Nature of the transaction and amount involved;
Name of the related party(ies) and the nature and extent of their interest in the transactions;
Effect of the transaction on the SME;
Any other information necessary to enable Investors to evaluate the effect of the transaction on the SME; and
A statement that the directors, excluding those who are involved in the transaction as a related party, consider that
the terms of the transaction are fair and reasonable in so far as its shareholders are concerned.
REPORTING OF REGULATORY COMPLIANCE:
The Chief Executive Officer/Managing Director of the SME shall:
(i)
(ii)
be responsible for ensuring compliance by the SME with all the requirements of these Regulations and all other
applicable rules, regulations, notices, guidelines, orders and the directives issued by the Commission or the
Exchange from time to time;
in coordination with Market Advisor assist the SME in listing and in assuring compliance with the relevant laws and
regulations at the times;
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(iii) report status of the compliance mentioned in sub-clause (i) above to the Board of Directors of the SME and the
Exchange within 15 days from the end of each quarter;
(iv) act with due skills, diligence and care at all times.
(d)
DISCLOSURE OF MISCELLANEOUS INFORMATION:
An SME shall notify, without delay, to the Exchange the information relating to:
(i)
(ii)
(iii)
(iv)
(v)
change of its Market Advisor or Market Maker (if any);
any change in its accounting reference date;
any change in its registered address;
the resignation, dismissal or appointment of any director giving the date of such occurrences; and;
any other information in such form and within such timeframe as may be required by the Exchange.
5A.14. SUSPENSION OF TRADING:
The Exchange may suspend trading in the equity securities of an SME in case:
(a)
(b)
(c)
(d)
trading in the shares is not being conducted in an orderly manner;
the SME fails to comply with any provision of this chapter;
it is required to do so in the best interest of the market and the protection of Investors; or
the integrity and reputation of the market has been or may be impaired by dealings in the equity security of SME.
5A.15. DISCIPLINARY ACTIONS:
If the Exchange considers that an SME has contravened any of the provisions of this chapter, it may take one or more of
the following measures:
(a)
(b)
(c)
(d)
(e)
(f)
Censure the SME;
Impose a fine on the SME or the promoters/ sponsors/directors/CEO of the SME;
Publicly disclose the fact that the SME has been fined or censured;
Disclose the names of the directors and CEO of the SME through its website;
Place the SME in the defaulters’ segment; or
Suspend trading in the shares of the SME.
5A.16. EXIT FROM THE SME BOARD:
An SME may be excluded from the SME Board in the following events:
(a)
(b)
(c)
Voluntary de-listing
Compulsory de-listing
Migration from SME Board to the Exchange’s main board.
5A.17. VOLUNTARY DE-LISTING OF SME FROM THE SME BOARD:
5A.17.1. The SME may apply to the Exchange for delisting from the SME Board supported by reasons thereof and the proposed
purchase price of equity security to be delisted after obtaining approval in general meeting of the SME by not less than ¾
of the security holders present in person or by proxy at such general meeting.
5A.17.2. The minimum purchase price proposed by the sponsors will be the highest of the benchmark price based on any of the
following:
Current market price as of the date the Exchange receives the intimation under para 5A.17.1. above;
Average Market Price: calculated based on the daily closing price of the three years preceding the date the
Exchange receives the intimation under para 5A.17.1. If the SME has been in existence less than three years, the
average shall be based on the period since the listing of the SME on the SME Board;
(c) The intrinsic value per share: determined on the basis of revaluation of assets, carried out by professional evaluator
approved by Pakistan Banks’ Association (PBA) or any Investment Bank. The revaluation of assets carried out by
the evaluators shall not be older than six months from the date the Exchange receives the intimation under para
5A.17.1. above;
(d) The maximum price at which the sponsors had purchased these shares from the open market in the preceding one
year.
(a)
(b)
5A.17.3. While evaluating the SME application for the delisting, the Exchange may require the SME to take precautions in order to
avoid the infringement of the investors’ rights. In any case voluntary de-listing of an SME shall be subject to compliance
by the SME with the prescribed procedure, guidelines/criteria and other terms and conditions as may be laid down by the
Exchange.
5A.17.4. The Exchange may for any reason whatsoever refuse to accept the proposal of the company, the purchase price and/or
the request to de-list the securities.
5A.18. COMPULSORY DE-LISTING OF SME FROM THE SME BOARD:
5A.18.1. An SME may be delisted from the SME Board, if:
(a)
Disciplinary action has been taken against the SME by the Exchange under para 5A.15. and the SME fails to rectify
the default for a period of six months;
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(b)
The independent audit report on the annual financial statement of the SME sets forth an adverse opinion or the
disclaimer of opinion by an auditor for two consecutive periods.
Provided that the Exchange shall issue a warning to the SME for correcting the problems prior to taking a decision to
delist the SME from the SME Board.
5A.18.2. If it fulfills the criteria for migration to the main board and its application for the listing to the main board is accepted by
the Exchange;
5A.18.3. Where an SME is delisted under clause 5A.18.1.(a) above, no company promoted by promoters and directors of such
delisted company shall be permitted to be listed on SME board for a period of five years from the date of such delisting.
5A.19. MIGRATION FROM SME BOARD TO THE MAIN BOARD:
5A.19.1. An SME whose equity securities are listed on SME Board shall apply for the listing of its securities on main board of
Exchange within 2 months where post issue paid-up capital of the SME exceeds Rs. 200 million;
5A.19.2. An SME applying for listing on the main board of Exchange shall, in addition to the requirements laid down in chapter 5
of KSE Regulations, comply with the additional requirements as may be prescribed by the Exchange.
5A.19.3. The Exchange may waive any listing requirements of chapter 5 of KSE Regulations for an SME migrating to the main
board.
5A.19.4. The Exchange shall waive initial and annual listing fee for listing on main board in the first year of migration of an SME to
the main board.
5A.20. INITIAL AND ANNUAL LISTING FEE:
5A.20.1. An SME applying for listing of its equity securities under this chapter shall be required to pay an initial listing fee
equivalent to 0.05% of its post issue paid-up capital subject to a maximum of Rs. 50,000/-.
5A.20.2. Whenever the SME increases its paid-up capital, it shall be required to pay to the Exchange an additional listing fee
equivalent to 0.05% of increase in the paid-up capital subject to a maximum of Rs. 50,000/-.
st
5A.20.3. The SME shall pay an annual listing fee for each subsequent financial year of the Exchange, commencing from 1 July
th
th
and ending on 30 June , which shall be payable by or before the 30 September in each calendar year, as per the
following schedule:
S.#
SMEs having Paid-Up Capital
Amount of fee
(i)
Upto Rs. 50 million
Rs. 20,000/-
(ii)
Above Rs. 50 million & upto Rs.100
million
Rs. 30,000/-
(iii)
Above Rs.100 million & upto Rs. 200
million
Rs. 40,000/-
(iv)
Above Rs. 200 million & upto Rs. 300
million
Rs. 50,000/-
Provided that the Exchange may relax/revise the above fees or any of the slabs or add new slabs as it may deemed
appropriate, subject to prior approval of the Commission.
Provided further that every SME applying for listing shall pay annual listing fee for the entire financial year of the
Exchange along with listing application irrespective of the date of its listing during the financial year.
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FORM I
FORM OF APPLICATION FOR SEEKING LISTING OF AN SME ON THE EXCHANGE UNDER SECTION 9 OF THE
SECURITIES AND EXCHANGE ORDINANCE, 1969
To:
The Secretary,
Karachi Stock Exchange Limited,
Karachi.
Dear Sir,
1.
We hereby apply for the listing of our (Name of the SME)
______________________ on your Stock Exchange.
2.
Necessary information and documents as required under the Regulations and mentioned at Annexure-I to Form I
are enclosed herewith.
Yours faithfully,
______________________
SIGNATURE & ADDRESS
c.c. to:
The Securities & Exchange Commission of Pakistan
ISLAMABAD - as required under Sub-Section (1) of Section 9 of the Securities & Exchange Ordinance, 1969.
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Annexure-I
LIST OF DOCUMENTS REQUIRED TO BE SUBMITTED ALONGWITH APPLICATION FOR SEEKING LISTING OF
AN SME ON THE EXCHANGE UNDER SECTION 9 OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969
An SME along with application on Form-I for listing under section 9 of the Securities and Exchange Ordinance, 1969
shall furnish the following documents/information:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Memorandum and Articles of Association containing copy of the certificate of incorporation and copy of the
certificate of commencement of business.
A brief history of the SME since incorporation giving names of the sponsors/promoters and all directors, details of its
activities including any re-organization, changes in its capital structure and borrowings.
Names and addresses of the directors and persons holding ten per cent or more of any class of equity security as on
the date of application together with the number of shares and other securities convertible into ordinary shares held
by each of them.
A statement showing cash dividends and bonuses paid (if any) during the last 3 years or such shorter period as the
company may have been in existence.
A statement containing particulars, dates of and parties to all material contracts, agreements (including agreements
for technical advice and collaboration), concessions and similar other documents except those entered into in the
normal course of the company’s business or intended business together with a brief description of the terms of such
agreements.
Particulars of the security listing of which is sought.
An undertaking on the format as prescribed in Form-II.
Auditors’ Certificates on the SME’s latest balance sheet, five years income statement containing EPS as well, paid
up capital and the break-up value per share on the basis of latest audited accounts. The certificate must contain
calculation of the Break-up value.
Copy of the resolution passed by the Board of Directors of the SME with respect to issue and listing of the shares.
Copy of the appraisal report prepared by the Market Advisor.
Consent of Market Maker appointed by the SME under this Chapter.
Undertaking by the Market Maker, on the format provided in Form-III, for compulsory Market Making in the share of
the SME, in case the SME has apppointed the Market Maker.
Copies each of Information Memorandum, audited annual accounts of the SME for the last 5 years or for a shorter
period if five years of the commencement of business are not completed.
Copy of application submitted to the CDC for declaration of the share of the SME as an eligible security for its CDS.
Report of State Bank of Pakistan that name of the SME as well as names of other companies in which directors of
the SME are holding directorship and name of promoters/sponsors/controlling directors, of the SME are not in the
Defaulter’s List of SBP either in their individual capacity or in the capacity of Directors of other companies. (This will
not apply to nominee Directors of the Federal Government, Provincial Governments and Financial Institutions).
Pay Order/Bank Draft/Cheque in favour of the Exchange for payment of initial listing fee, annual listing fee and
service charges as prescribed under the Regulations.
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Schedule-I
CONTENTS OF INFORMATION MEMORANDUM
The Information Memorandum (IM) prepared with respect to issue of shares for listing under this Chapter shall contain at
least the following information/disclosures:
i.
On cover page, the following shall be disclosed:
a)
A disclaimer in bold letters stating that, “This is not a prospectus for issue of shares to the general public but a
document prepared for the purpose of offering shares of an SME only to Qualified Institutional Buyers(QIBs)
and High Net Worth Individual Investors (HNWIs). This IM has not been approved by the Securities & Exchange
Commission of Pakistan (the Commission) or the Karachi Stock Exchange (the Exchange)”;
b)
A disclaimer in bold letters stating that, “This is an IM by … [Name of the issuing SME which is an SME. SMEs
being small capital based companies exposed to the risk of high volatility in its share market price at the
Exchange after listing. The investors are strongly advised to evaluate their risk tolerance and sustainability
capability prior to investing in the equity of this company. KSE or SECP shall not be held responsible for any
direct or indirect losses incurred due to investment in the equity of this SME.”
c)
A statement in bold letters stating that, “The SME Board is designed primarily for emerging of small capital
based companies. Companies listed at SME Board are comparatively exposed to higher investment risk as
compared the companies listed at the main Board of the Exchange. The prospective investor should, therefore,
be aware of the risk of investing in such companies and should make the decision to invest only after careful
diligence of the issue and consideration. It is advisable to consult any independent investment advisor before
making investment in the equity of this SME.”
d)
A statement in bold letters stating that, “The Board of Directors of … (Name of the issuing SME) … accepts
responsibility for accuracy of the information contained in this document”; and
e)
Name of the SME, name of the entity that has prepared the IM and date of the IM.
ii.
Table of contents, Executive summary by the entity that has prepared the IM, purpose of preparation of the IM and
their scope of work;
iii.
Glossary of technical terms and acronyms should be provided after the table of contents;
iv.
The capital structure of the SME.
v.
Information about the SME like its name, date of its incorporation, registration number, addresses of its registered &
head offices, names of its sponsors, major shareholders and associated companies/undertakings etc.;
vi.
Organization structure of the SME and its principle business;
vii. Latest pattern of shareholding of the SME.
viii. Names of the directors of the SME and their directorships in other companies;
ix.
Profile of the management of the SME including all the members of the Board of Directors excluding the nominee
directors, the Chief Financial Officer and the Company Secretary;
x.
Future outlook/ business strategy of the SME.
xi.
Highlights of major restructuring, if any, like merger, demerger, amalgamation, acquisition, reorganization, financial
restructuring etc.;
xii. Five years financial highlights relating to cash flows and financial & operating position of the SME including key
financial ratios like debt/equity ratio (pre & post issue), current ratio, return on equity, return on assets, earning per
share, Break-up value per shares (pre & post issue) etc. in tabular form;
xiii. Salient features of the Issue like issue size, face value of share, offer price etc.
xiv. Justification for premium, if any;
xv. Terms & conditions for investment in the SME’s shares;
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xvi. Rights of the shareholders like right to vote, dividend etc.;
xvii. Purpose of the issue & breakup of the utilization of the proceeds of the Issue;
xviii. In case the proceeds of the Issue are to be utilized for project financing, detail of such project like project cost &
means of financing (i.e. Financial Plan), project implementation schedule, latest status of the implementation of the
project, expected date of completion of the project, expected date of trial & commercial production etc.;
xix. Five years financial projections (i.e. Balance Sheet, Income Statement, cash flow statement and statement on
changes in equity) including key financial ratios;
xx. All the risk factors associated with the investment in the shares of the SME and their mitigants;
xxi. Basic information about the industry the SME belongs to, key players in the industry, basic raw material used by the
SME, if any, and list of supplier thereof, main clients of the SME, competitors of the SME, etc.;
xxii. Summary of all the material contracts relating to the Issue and the project, if any;
xxiii. Any other material fact, information and disclosure as required under any agreement, rules, regulations or the law for
the time being enforced which may affect the investor’s decision to invest;
xxiv. Names of all the stock exchange(s) where the SME will be listed;
xxv. Tentative subscription dates;
xxvi. Tentative date of allotment of shares to the investors.
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FORM II
FORM OF UNCONDITIONAL UNDERTAKING BY THE SME
Date: _______________
The Board of Directors,
Karachi Stock Exchange Limited,
Karachi.
UNDERTAKING
We undertake, unconditionally, to abide by the Regulation(s) of the Karachi Stock Exchange applicable to the company
which presently are, or hereinafter may be in force.
We further undertake:
1.
That our shares shall be quoted on the _______________ at the discretion of the Exchange;
2.
That the Exchange shall not be bound by our request to remove shares from the ______________________;
3.
That the Exchange shall have the right, at any time to suspend or remove the said share for any reason which the
Exchange consider sufficient in the interest of the market;
4.
That such provisions in the Articles of Association of our company or in any declaration or agreement relating to any
other security as are or otherwise not deemed by the Exchange to be in conformity with the Listing of Companies
and Securities Regulations of the Exchange shall, upon being called upon by the Exchange, be amended to
supersede the Articles of Association of our company or the nominee relating to the other securities to the extent
indicated by the Exchange for purposes of amendment and we shall not raise any objection in relation to a direction
by the Exchange for such amendment; and
5.
That our company and/or the share may be delisted by the Exchange in the event of non-compliance and breach of
this undertaking.
Yours sincerely,
__________________________________
SIGNATURE OF AUTHORIZED PERSON
Common Seal of the Company
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Karachi Stock Exchange Regulations
FORM III
FORM OF UNCONDITIONAL UNDERTAKING BY THE MARKET MAKER
To:
The Head of Operations,
Karachi Stock Exchange Limited,
Karachi.
UNDERTAKING
We (Name of Market Maker), have been appointed by … (Name of SME) … as the Market Maker for Market Making in
its shares applied for listing at SME Board of the Exchange.
We the Market Maker hereby undertake as under:1.
That we shall abide by all the applicable provisions of the Regulations Governing Listing and Trading of Equity
Securities of Small and Medium Enterprises (SMEs) which presently are, or hereinafter may be in force.
2.
That we will compulsorily make market in the scrip of the SME at least for a period of three years from the date of
commencement of trading on the Exchange i.e. from the date of listing and shall not withdraw from such Market
Making obligation until another Market Maker is appointed under the Regulations and the Exchange has given its
consent for such withdrawal.
3.
That we will quote bids and offer in the share of the SME within the spread which shall not be more than 10%.
Yours faithfully
___________________________
(Signature of Authorized Person)
Common Seal of the company
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Chapter 5B: LISTING OF DEBT SECURITIES REGULAIONS
5B.1.
APPLICABILITY OF REGULATIONS:
5B.1.1.
All the provisions provided in the chapter 5 of KSE Regulations relating to Listing of Companies and Securities
Regulations, presently in force or as amended from time to time, shall be applicable unless otherwise provided in this
chapter.
5B.1.2.
The provisions of this chapter shall not apply to the matters relating to Government Debt Securities Regulations as
provided in chapter 6 of KSE Regulations.
5B.2. DEFINITIONS
In this chapter, unless the subject or context otherwise requires:
(a) “Bid Price” shall mean the price for which a Market Maker is willing to pay for the purchase of Debt Securities;
(b) “Debt Security” shall mean any instrument creating or acknowledging indebtedness which is issued or proposed to
be issued by an Issuer including, in particular, debentures, debenture stock, loan stock, bonds, notes, commercial
paper, sukuk or any other debt security of an Issuer, whether constituting a charge on the assets of the company or
not;
(c) “Debt Securities Trustee” shall mean a person as defined in the Debt Securities Trustee Regulations, 2012;
(d) “Information Memorandum” for the purpose of this chapter shall mean a document outlining the salient features,
risks and terms of Debt Securities circulated to pre-IPO Investors to assess demand for the Debt Securities and to
enable the prospective Investors to make an informed investment decision;
(e) “Market Maker” for the purpose of this chapter means a person appointed by the Issuer for Market Making of its Debt
Security;
(f) “Market Making” shall mean the display of two-way quotes i.e. Bid Price and Offer Price on continuous basis during
the designated market making period by the Market Maker for the purchase and sale of the concerned Debt
Securities” in accordance with this chapter;
(g) “Offer Price” shall mean the price for which a Market Maker is willing to sell Debt Securities;
(h) “Short Term” shall mean a period of one or less than one (1) year;
(i) “Spread” shall mean the difference between the Bid Price and the Offer Price.
5B.3.
5B.3.1.
ELIGIBILITY FOR LISTING
Any Issuer may apply for listing of its Debt Securities offered to the General Public under this chapter provided it fulfills
the following criteria:
it has commenced commercial operations ;
it is allowed by the Commission to issue, circulate and publish prospectus for issue of such Debt Security;
its paid up capital is not less than Rs. 200 million and the total issue size including pre-IPO placement if any, is not
less than Rs. 200 million;
(d) its entity rating and the instrument rating is not less than BBB. Instrument rating in case of Short Term instruments
may not be required;
(e) any of its Securities is not on the Defaulter’s Segment of the Exchange, if it is already listed;
(f) it and its sponsors and directors has/have no overdue loans of any bank or financial institution .
(a)
(b)
(c)
5B.3.2. The Exchange shall not entertain listing application of an Issuer:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Whose Chief Executive has been found to have violated any provision of this chapter or chapter 5 of KSE
Regulations of any others/listed company on the Exchange in which he had been the Chief Executive.
Whose promoters/sponsors/controlling directors are in the defaulters list of State Bank of Pakistan either in their
individual capacity or in the capacity of directors of other companies. Or there is an overdue payment reflected
against the name of promoters/sponsors/controlling directors in the latest CIB report. Provided that such person will
be allowed if he clears his name after settling his dues. However, this will not apply to nominee directors of the
Government and Financial Institutions. The Issuer shall also provide a list of its Controlling Directors.
Whose promoters/sponsors/controlling directors are also promoters/sponsors/controlling directors in other listed
companies, which are in default of any provision of this chapter or chapter 5 of KSE Regulations. Further, no person
shall be allowed to act as sponsor/controlling director of a company which was delisted during last five years and
non-compliant of any provision of this chapter or chapter 5 of KSE Regulation at the time of its delisting. However,
this will not apply to nominee directors of the Government and Financial Institutions. The Issuer shall also provide a
list of Controlling Directors.
Which is a wholly owned subsidiary company of a Listed Company which has violated any provision of this chapter
or chapter 5 of KSE Regulations and is still in default of any such provision.
Which is an associated company of any other Listed Company which has violated the Listing Regulations of the
Exchange and is still in default of any provision of this chapter or chapter 5 of the KSE Regulations. However, this
will not apply to nominee directors of the Government and Financial Institutions.
If any of its directors/sponsors/substantial shareholders had been declared defaulter by the stock exchange or has
been the promoter/sponsor/substantial shareholder of a Brokerage House which was expelled or whose TRE
Certificate was cancelled/forfeited by a stock exchange.
A running company for one full year or more, reflecting losses in their last audited accounts, shall not qualify for
listing its equity is eroded by 40% or more.
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5B.4.
CONDITIONS FOR LISTING OF DEBT SECURITIES
The Issuer that intends to list any of its Debt Securities on the Exchange shall comply with the following conditions:
5B.4.1. Minimum allocation of capital to the General Public excluding the Pre-IPO investors shall be as under:
in case issue size is upto Rs. 500 million, the allocation of capital to the General Public shall not be less than Rs.
100 million or 25% of the issue size, whichever is higher;
(ii) in case issue size is above Rs. 500 million and upto Rs. 2 billion, the allocation of capital to the General Public shall
not be less than Rs. 125 million or 15% of the issue size, whichever is higher;
(iii) in case issue size is above Rs. 2 billion and upto Rs. 10 billion, the allocation of capital to the General Public shall
not be less than Rs. 300 million or 10% of the issue size, whichever is higher;
(iv) in case issue size is above Rs. 10 billion, the allocation of capital to the General Public shall not be less than Rs.
1,000 million or 5% of the issue size, whichever is higher.
(i)
The Exchange, while keeping in view appetite for the Debt Securities being offered, may change the above allocation in
any manner it may deem fit.
5B.4.2. The Issuer shall appoint a Debt Securities Trustee for a period not less than the tenure of the Debt Security.
5B.4.3.
The Issuer shall appoint, through agreement in writing, a Market Maker for a period not less than the tenure of the Debt
Security.
5B.4.4.
The Company Secretary or any other officer of the Issuer shall be designated as Compliance Officer who shall perform
such functions as mentioned in regulation 5B.12.
5B.4.5.
The Issuer, before publication of prospectus, shall obtain CDC’s notice with respect to declaration of its Debt Security as
CDS eligible Security.
5B.4.6. The Debt Securities shall be issued only in Book-Entry form;
5B.4.7.
All Debt Securities other than Short Term shall be rated from a credit rating company registered with the Commission.
The credit rating report of the entity and the instrument shall be prepared on the basis of the Issuer’s latest audited
accounts or on the basis of the Issuer’s reviewed accounts if the audited accounts are older than six months. In case
where the instrument and entity rating is obtained from more than one credit rating agencies, all the ratings, including the
unaccepted rating(s), shall be disclosed in the prospectus.
5B.4.8.
In case of secured Debt Security, the Issuer shall give an undertaking in the prospectus to the effect that the assets on
which charge has been created are free from any encumbrances and if the charged assets are already charged to
secure any other debt, consent of the creditors having charge on the charged assets has been obtained.
5B.4.9.
Save as provided in the Trust Deed, the Issuer shall not make any change in the charged assets i.e. the assets backing
the Debt Security;
5B.4.10. Trading in Debt Securities listed under this chapter shall commence one day after the date of their formal listing;
5B.4.11. The Debt Securities shall be traded at the Exchange’s Bond Automated Trading System (BATS);
5B.4.12. The Issuer shall make available to the Exchange and to the bankers to the issue for distribution printed copies of the
prospectus and application forms in the quantity to be determined by the Exchange and the bankers to the issue and the
distribution agent, if any. The Issuer shall also accept applications on identical forms;
5B.4.13. The sponsors and directors of the Issuer shall not participate in subscription of Debt Securities offered to the General
Public.
5B.4.14. In case there is any allocation of capital, out of the pre-IPO placement, if any, to the associated companies or associated
undertakings of the Issuer, such allocation shall not in aggregate exceed 25% of the total issue;
5B.4.15. The prospectus with the proforma application form shall be published by the Issuer in at least one widely circulated
English and Urdu daily newspaper each at Karachi, Lahore and Islamabad or as the Exchange may in addition require,
at least seven (7) days in advance but not more than thirty (30) days before the date of the opening of the subscription
list.
5B.4.16. The prospectus and proforma application form shall be placed on the website of the Issuer and the consultant/Lead
Manager to the issue.
5B.4.17. Allocation of capital, out of the pre-IPO placement, if any, to any single investor shall not exceed 25% of the total issue;
5B.4.18. The Issuer shall inform the Exchange, in writing, of the subscription received under the hand of an authorized person
with certificate(s) from the bankers to the issue, within five (05) working days of the closing of subscription.
5B.4.19. The Issuer shall take a decision within ten (10) days of the closure of subscription list as to which applications have been
accepted or are successful and submit allotment register to the Exchange within ten (10) days of such decision.
5B.4.20. The Issuer shall refund the application money in case of unaccepted or unsuccessful applications within 10 days of the
date of such decision.
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5B.4.21. The Issuer shall ensure credit of the Debt Security in CDS, to the successful applicants within twenty one (21) days of
the closing of public subscription, under intimation to the Exchange.
5B.4.22. The Issuer shall ensure completion of the relevant requirements of formal listing of the Debt Security within twenty one
(21) days from the date of closure of public subscription.
5B.4.23. The Issuer shall, within twenty one (21) days of closing of subscription list, pay brokerage to the TRE Certificate Holders
of the Exchange at a rate not more than one per cent of the value of the Debt Securities actually sold through them.
5B.4.24. Any Issuer which makes a default in complying with the requirements of regulations 5B.4.21., 5B.4.22. and 5B.4.23.,
shall pay to the Exchange a penalty of Rs. 5,000/- (Rupees five thousand only) for every day during which the default
continues. The name of Debt security may be notified to the TRE Certificate Holders of the Exchange and placed on the
website of the Exchange.
5B.4.25. In case the Debt Security is not listed on the Exchange or the listing is refused by the Exchange, for any reason,
whatsoever, the Issuer shall forthwith pay without surcharge all moneys received from the applicants in pursuance of the
prospectus and every director of the Issuer, other than the nominee directors shall be, jointly and severally, liable to
repay that money with surcharge at the rate of one and half percent for every month or part thereof from the expiration of
the fifteenth day.
5B.4.26. An Issuer may issue Debt Securities which are convertible or exchangeable into ordinary shares provided such ordinary
shares are listed on any recognized stock exchange.
5B.5. PROCEDURE FOR LISTING OF DEBT SECURITIES UNDER THIS CHAPTER
For listing of Debt Securities under this chapter the following procedure shall be followed:
5B.5.1.
The Issuer shall for listing of any of its Debt Securities, make an application on Form-A to the Exchange along with the
documents/information as mentioned in Annexure-I.
5B.5.2. The Issuer shall pay an initial listing fee of such amount as mentioned in regulation 5B.9.
5B.5.3.
The Exchange may reject any application, made under this chapter at its sole discretion if it deems that listing of the
Debt Securities is not in the interest of the market, the Issuer does not meet the minimum eligibility criteria set out in this
chapter or the Issuer is in contravention of these Regulations:
Provided that, the Issuer shall be given an opportunity of hearing by the Exchange before the listing application is
rejected.
5B.6.
ISSUE OF DEBT SECURITIES
5B.6.1.
Issue of Debt Securities to the General Public by the Issuer shall be made through prospectus which shall be issued,
circulated and published after approval of the Commission as required under the Ordinance. The prospectus shall
contain such information, material and disclosures as required under the Ordinance; and
5B.6.2.
The Issuer shall also comply with the guidelines for listing of Debt Securities as laid down by the Exchange and/or
Commission from time to time.
5B.7.
CONTENTS OF INFORMATION MEMORANDUM
5B.7.1.
The Information Memorandum, if any, to be circulated to pre-IPO investors for offer of Debt Securities shall contain at
least such information as provided in Annexure-II to this chapter.
5B.7.2.
Information Memorandum shall be a private document and shall be circulated only to pre-IPO investors. Information
Memorandum shall not be used as a document inviting the General Public or a class of the General Public for
subscription of Debt Securities and shall include a statement to this effect.
5B.8.
POST LISTING REQUIREMENTS
5B.8.1.
Payment of markup, profit, interest or rent, as the case may be, and repayment of principal amount to Debt Security
holders shall be credited in their respective bank accounts electronically;
5B.8.2.
The instrument rating shall be reviewed annually based on the latest audited accounts from the credit rating agency
registered with the Commission and revision in the rating shall be intimated promptly by the Issuer to the Exchange and
the Debt Securities Trustee.
5B.8.3.
The Issuer shall provide access to the Debt Securities Trustee to the books of accounts and record relating to the Debt
Security.
5B.8.4.
The Issuer shall submit to the Exchange and the Debt Securities Trustee minutes of the meeting of Debt Security holders
within fourteen days of the date of such meeting.
5B.8.5.
The Issuer shall maintain a register of Debt Security holders and inform the Exchange and the Debt Securities Trustee of
the address where the register is kept.
5B.8.6.
The Issuer shall provide to the Exchange and the Debt Securities Trustee the following documents/information:
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(i)
(ii)
(iii)
(iv)
(v)
(vi)
5B.8.7.
A statement regarding the payment of markup, profit, interest or rent, as the case may be, on Debt Securities and
redemption of the principal amount, on semi-annual basis till complete redemption of such Debt Security;
Copy of its latest audited annual, half-yearly and quarterly accounts as and when finalized along with key financial
ratios. The key financial ratios must include at least the debt/equity ratio, current ratio, return on equity, return on
assets, earning per share, debt service coverage ratio;
Copy of any notice, circular, resolution, letter etc. including notice for meeting of the Debt Security holders,
letter/circular issued to the Debt Security holders in connection with the Debt Security and resolution relating to new
issue of Debt Securities by the Issuer;
Certificate from its auditors regarding maintenance of 100% security cover in respect of the Debt Security, if it is
secured. The certificate should be submitted on annual basis along with submission of the annual accounts;
Certificate from its auditors regarding maintenance of redemption reserve, where required on annual basis;
Decision of the Board of Directors of the Issuer regarding prepayment of any debt obligation, if any.
The Issuer shall, in addition to the documents/information mentioned above, submit to the Exchange the following
information, documents and reports:
(i)
any delay/default in payment of profit/mark up/interest and principal amount on any other debt obligation and
reasons thereof;
(ii) the date, at least five working days in advance, of the meetings of its Board of Directors at which recommendation or
declaration of issue of any Debt Security or any other matter affecting the rights or interests of holders of the Debt
Security is proposed to be taken up;
(iii) change, if any, of the Debt Security Trustee on same day;
(iv) change, if any, subject to the provisions of the prospectus and the Trust Deed, in the nature and features of the Debt
Security or in the rights or privileges of its holders as and when occurred;
(v) change, if any, in its accounting policies;
(vi) change, if any, in the credit rating of the Issuer;
(vii) change, if any, in its management and address of its registered office;
(viii) change, if any, that may have effect on the rights and privileges of the Debt Security holders;
(ix) change, if any, in the nature of business of the Issuer due to any reason;
(x) prohibitory order, if any, restraining the Issuer from transferring the Debt Security from the name of any Debt
Security holder;
(xi) any transaction whether related party or otherwise that adversely affect interest of the Debt Security holders;
(xii) any action against or by the Issuer which will result in the redemption, conversion, cancellation, retirement in whole
or in part of the Debt Security;
(xiii) any action against or by the Issuer that would adversely affect payment of principal amount and profit/mark
up/interest on the Debt Security;
(xiv) any other information that is not in the public domain but necessary to be known to the holders of Debt Security to
enable them to avoid creation of a false market in the Debt Security; and
(xv) any other information/documents as required by the Exchange.
5B.8.8.
The Issuer, till complete redemption of the Debt Security, shall ensure that:
(i)
The unclaimed profit/mark-up/interest, if any, is not forfeited and is kept under a separate head of account namely,
“Unclaimed Profit/Mark-up/Interest”;
(ii) Proper book closure is announced for the purpose of payment of profit/mark-up/interest, redemption of the principle
amount, meeting of the security holders or for such other purposes as the Exchange may deem fit; and
(iii) No modification has been made in the features of the Debt Security like in its term, coupon rate, conversion,
redemption, security etc. by any manner otherwise than that as disclosed in the prospectus and the Trust Deed;
5B.8.9.
Upon request, copies of its annual audited accounts and quarterly accounts are provided to the Debt Security holders;
5B.8.10. The Issuer shall provide a minimum period of 7 days but not exceeding 15 days at a time for closure of Security Transfer
Register, for any purpose, not exceeding 45 days in a year in the whole.
5B.8.11. Book closure for entitlement of the Debt Security holders shall be intimated to the Exchange not later than 14 days prior
to commencement of the same.
5B.8.12. No Issuer shall exercise any lien whatsoever on listed Debt Securities and nor shall there be any restriction on their
transfer.
5B.8.13. In case the Issuer fails to pay its repayment obligations including interest, mark-up, profit or rent, as the case may, on the
due date, it shall promptly inform the Exchange of such a default and call a meeting of the Debt Securities holders within
15 days of the due date to explain the reasons for default. Senior level representation from the Issuer, including Chief
Executive, shall attend this meeting. The Exchange may notify the fact of such default and the name of the defaulting
company by notice and also by publication of the same in the Daily Quotations of the Exchange.
5B.8.14. The Issuer shall furnish to the stock exchange soft copy of the complete list of its Debt Security holders within 30 days of
the end of each calendar year.
5B.9.
PAYMENT OF LISTING FEE
The Issuer shall pay to the Exchange initial listing fee and annual listing fee at the rate as mentioned below:
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an initial listing fee equivalent to 0.05% of the total issue size of the Debt Security subject to a maximum of Rs. 0.5
million.
an annual listing fee shall be payable in respect of each financial year of the Exchange, commencing from 1st July
and ending on 30th June next, before the 30th September in each calendar year, as per following schedule:
(i)
(ii)
S. No.
i.
Total Issue Size
Up to Rs. 500 million
Amount of fee
Rs. 30,000/-
ii.
Above Rs. 500 million & up to Rs.1000 million
Rs. 40,000/-
iii.
Above Rs. 1000 million
Rs. 50,000/-
The Exchange with prior written approval of the Commission may revise the above mentioned initial and annual listing
fees.
5B.10. FUNCTIONS OF A DEBT SECURITIES TRUSTEE
The Debt Securities Trustee shall be responsible to perform such functions and duties as prescribed in the Debt
Securities Trustee Regulations, 2012.
5B.11. APPOINTMENT AND FUNCTIONS OF MARKET MAKER
5B.11.1. For the purpose of this chapter, Market Maker shall be appointed by the Issuer
5B.11.2. A person shall be eligible to be appointed as a Market Maker if such person:
(a) Is:
i.
ii.
A Corporate Brokerage House; or
A financial institution which satisfies the eligibility criteria devised by the Exchange with prior approval of the
Commission. In such case, the application shall be accompanied with prior written consent from the concerned
designated Broker.
(b) Has a minimum equity (net of provisions and capitalized losses if any) of Rs. 100 million as per the latest audited
financial statements.
5B.11.3. A Market Maker may resign after three months of commencement of its term by providing the Issuer and Exchange at
least two months’ prior written notice along with the reasons for resignation and specifying the effective date of
resignation, provided that a substitute Market Maker in the Debt Security which fulfills the eligibility criteria is ready to
take the outgoing Market Maker’s role and responsibilities for the remaining period of the term of such Debt Security.
5B.11.4. The Market Maker shall be responsible to perform the below mentioned functions:
(a) The spread charged by the Market Maker shall not be more than the one as disclosed in the prospectus for issue of
the Debt Security.
(b) The Market Makers must at all times hold at least one percent of the outstanding amount of the Debt Security.
(c) The Market Maker shall mandatorily make available two way quotes on continuous basis during Market Making
period; Market Maker shall be bound to purchase or sale a maximum of one percent of total principal outstanding of
the issue in the Debt Security during a business day or such other percentage as may be prescribed by the
Exchange;
(d) Market Marker shall make available copy of the prospectus to the investors at all times;
(e) It shall be obligatory for a Market Maker to replenish its orders/quotes within 90 seconds following full execution,
withdrawal, expiration or any change in the price of either bid or offer;
(f) The Market Making Orders/Quotes are to be maintained on both sides during Market Making period as per Market
Making agreement which shall be for the tenure of the Debt Security.
(g) The Market Maker shall be allowed to Blank Sale in Debt Security subject to sufficient pre-existing interest at the end
of each Blank Sale day to validate that the Market Maker can deliver the quantity sold blank during the day.
5B.12. FUNCTIONS OF THE COMPLIANCE OFFICER
5B.12.1. The compliance officer shall be responsible for ensuring compliance by the Issuer with all the requirements of this
chapter and the directives issued, if any, by the Exchange.
5B.12.2. The compliance officer shall report status of the compliance mentioned in regulation 5B.12.1 above at every meeting of
the Board of Directors of the Issuer till complete redemption of the issue; and
5B.12.3. The compliance officer shall also report status of the compliance, mentioned in regulation
5B.12.1. above, directly to
the Exchange and the Debt Securities Trustee.
5B.13 CIRCUIT BREAKERS AND SUSPENSION OF TRADING
5B.13.1. The security-wise circuit breakers imposed by the Exchange from time to time shall also be applicable on Debt Securities.
Further, the Market Maker may not be required to enter two-way quotes where the relevant Debt Security continuously
trades for fifteen minutes within one percent below the applicable circuit breakers.
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5B.13.2. The Exchange may suspend trading in any Debt Security where:
(a) the integrity and reputation of the market has been or may be impaired by dealings in the Debt Security;
(b) it considers that the Issuer has failed to comply with any provision of these Regulations including post listing
requirements as provided under regulation 5B.8 or if payment of profit/mark-up/interest or redemption of principal
amount is delayed ; or
(c) the protection of investors so requires.
5B.14. DISCIPLINARY ACTION
If the Exchange considers that the Issuer of any listed Debt Securities has defaulted or
this chapter, it may take any or all of the following measures:
contravened any provision of
5B.14.1. It may impose a fine on the Issuer to the extent not exceeding Rs. 100,000 for each default or contravention, and, in case
of continuing default, failure, refusal or contravention, to a further fine not exceeding Rs. 10,000/- (Rupees ten thousand
only) for every day after the first day during which such contravention continues:
Provided that no such penalty shall be imposed unless an opportunity of hearing has been granted;
5B.14.2. Publish the fact that the Issuer has been fined or warned; and
5B.14.3. It may place the Debt Security on the Defaulters’ Segment and may suspend its trading if payment of profit/mark-
up/interest or redemption of principal amount is delayed.
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FORM A
FORM OF APPLICATION UNDER SECTION 9 OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969 FOR LISTING
OF DEBT SECURITIES UNDER THIS CHAPTER
[Regulation 5B.5.1.]
[This shall be on the Letterhead of the Issuer]
Dated: ________________
The General Manager,
Karachi Stock Exchange Limited,
Karachi.
Dear Sir,
1.
We hereby apply for listing of (Name of the Debt Security) of (Name of the Company) on your Stock Exchange
under Section 9 of the Securities and Exchange Ordinance, 1969 read with 5B.5.1. of these Regulations.
2.
Necessary documents/information as required under 5B.5.1. of the Regulations and mentioned in Annexure-I
thereof are enclosed herewith.
[Name, designation and signature of the CEO, CFO or the Company Secretary duly authorized by the Board of Directors
of the Company by way of resolution to make an application on behalf of the Company]
Copy for information to:
The Securities and Exchange Commission of Pakistan, Islamabad.
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Annexure-I
DOCUMENTS / INFORMATION REQUIRED TO BE SUBMITTED ALONG-WITH APPLICATION FOR LISTING OF
DEBT SECURITIES UNDER THIS CHAPTER
[Regulation 5B.5.1.]
An Issuer applying for listing of its Debt Securities under this chapter shall provide the following documents/information along
with application:
(i)
Copy of the full and abridged prospectus for clearance of the Exchange before submission of the same to the
Commission for approval under section 57 of the Companies Ordinance, 1984;
(ii)
Copy of the resolution passed by the Board of Directors of the Issuer approving issuance of the Debt Securities to the
General Public and submission of application to the Exchange for listing along with minutes of the meeting of the
Board of Directors.
(iii)
Copy of the license, consent, approval, NOC etc. in case of specialized companies from the concerned regulatory
authority for undertaking/carrying on the business.
(iv)
Copy of the Information Memorandum, if any, prepared for circulation among the pre-IPO investors.
(v)
Pay Order/Bank Draft/Cheque in favour of the Exchange for payment of non-refundable initial listing fee at the rate as
mentioned in this chapter.
(vi)
An unconditional undertaking on non-judicial stamp paper by the Issuer on the format as given at Annexure-III.
(vii)
In case of secured Debt Securities, an undertaking on non-judicial stamp paper by the Issuer stating that appropriate
and sufficient security has been created in favour of the Debt Securities Trustee, that the assets on which charge has
been created in favour of the Debt Securities Trustee are free from any encumbrances and that
permission/NOC/consent of the existing creditors who have charge on such assets have been obtained for creation of
charge on these assets in favour of the Debt Securities Trustee.
(viii)
In case a part of the issue is allocated to pre-IPO investors, an undertaking on non-judicial stamp paper by the
Company stating that pre-IPO investors shall subscribe to the Debt Security at least three days prior to the
commencement of the public subscription and that it shall provide a certificate from its auditors testifying receipt of the
subscription money from all the pre-IPO investors.
(ix)
Copy of power of attorney in favour of the consultant to the issue, if any.
(x)
Copy of the consent letter from the consultant to the issue, if any. The letter shall state that the consultant has given its
consent to act as consultant to the issue and that this consent shall not be withdrawn till the formal listing of the Debt
Security and if withdrawn any time before the formal listing, the Exchange will be informed immediately.
(xi)
A letter from the consultant to the issue, if any, stating that:
(a) to the best of their knowledge and belief the disclosures made in the prospectus are true, fair, correct and
adequate;
(b) the Issuer fulfills all the requirements of this chapter of these Regulations;
(c) the Debt Security, if required, created in favour of the Debt Securities Trustee is appropriate and sufficient; and
(d) the assets on which charge has been created in favour of the Debt Securities Trustee are free from any
encumbrances and that permission/NOC/consent of the existing creditors who have charge on such assets has
been obtained for creation of charge on these assets in favour of the Debt Securities Trustee.
(xii)
Copy of the consent letter from the Legal Advisor to the issue.
(xiii)
Latest pattern of shareholding of the Issuer.
(xiii)
Copy of the complete Credit Rating Report of the entity and the instrument obtained from any Credit Rating
registered with the Commission.
(xv)
Copy of the Trust Deed executed between the Issuer and the Debt Securities Trustee.
(xvi)
Copy of the Letter of Hypothecation along with detail of assets hypothecated, if applicable.
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(xvii) Copy of CDC notice with respect to declaration of its Debt Security as CDS eligible security.
(xviii) CIB Report from State Bank of Pakistan in respect of the Issuer, member of its Board of directors, holding company
and associated companies, if any of the Issuer. (This will not apply to nominee Directors of the Government and
Financial Institutions).
(xix)
Copy of underwriting agreement(s), where applicable, along with No Objection Certificate(s) from the underwriter(s) for
publication of the name(s) in the prospectus and confirmation of non-execution of any buy-back/repurchase
agreement(s) with the sponsors and/or with any other person(s).
(xx)
Auditors’ Certificates of the Issuer under section 53(I) read with Clause 28(1) of Section 2 of Part-I of the second
schedule to the Companies Ordinance, 1984 also showing the break-up value per ordinary share on the basis of latest
audited accounts along with its calculation and copy of the consent of the auditor as required under Section 57(5) of
the Companies Ordinance, 1984.
(xxi) Copies of the consent letters from Bankers to the Issue along with undertaking of the banks concerned, confirming that
the subscription money shall be kept in a separate bank account, which shall not be released to the Issuer without
prior written approval of the Exchange and /or until the Debt Security is formally listed.
(xxii) Consent of the Debt Securities Registrar to the Issue.
(xxiii) Copies of all the material contracts related to the Debt Security issue.
(xxiv) Any other documents/material contract and such other particulars as may be required by the Exchange.
(xxv) In case of an Issuer whose equity shares are not listed on the Exchange, following additional documents shall also be
provided:
(a) Copy of memorandum and articles of association of the Issuer.
(b) Copy of the certificate of incorporation of the Issuer.
(c) Copy of the certificate of commencement of business of the Issuer.
(d) Copy of the certificate for change of name of the Issuer, if applicable.
(e) Copy of the conversion certificate from private to public company; if applicable.
(f)
Audited annual accounts of the Issuer for the last 3 years and its latest quarterly accounts, if any or for a shorter
period if three years of the commencement of business are not completed.
Notes:
(i)
Please note that copies of all the documents are certified by the Company Secretary.
(ii)
Please note that all documents relating to regulatory authority are duly certified from the concerned regulatory
authority.
(iii)
In addition to one copy in hard form, scanned copies one each of the following documents shall be provided:
a.
Memorandum and Articles of Association where applicable;
b.
Information Memorandum, if any; and
c.
Audited annual accounts of the Issuer for the last 3 years and its latest quarterly accounts or for a shorter period if
five years of the commencement of business are not completed.
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Annexure-II
CONTENTS OF INFORMATION MEMORANDUM
[Regulation 5B.7.1]
1.
The Information Memorandum, if any, prepared for circulation to pre-IPO investors shall contain at least the following
information/disclosures:
(i)
(ii)
On cover page the following shall be disclosed:
A.
a disclaimer in bold letters stating that, “This is not a prospectus for issue of securities to the general public but a
document prepared for the purpose of offering the Debt Security only to pre-IPO investors. This Information
Memorandum has not been approved by the Securities & Exchange Commission of Pakistan (the Commission)
or the Karachi Stock Exchange (the Exchange)”;
B.
a disclaimer in bold letters stating that, “The Board of Directors of … (Name of the Company) … accepts
responsibility for accuracy of the information contained in this document”; and
C.
name of the Issuer, name of the entity preparing the Information Memorandum and date of the Information
Memorandum.
Table of contents, glossary of technical terms and acronyms, executive summary by the entity preparing the
Information Memorandum, purpose of preparation of the Information Memorandum and their scope of work;
(iii)
Information about the Issuer like its name, date of its incorporation, registration number, addresses of its registered &
head offices, date of its listing, if applicable, name of the stock exchange where it is listed, if applicable, its sponsors
and major shareholders, associated companies/ undertakings etc.;
(iv)
Latest pattern of shareholding of the Issuer;
(v)
Names of the directors of the Issuer and their directorships in other companies;
(vi)
Profile of the management of the Issuer including all the members of the Board of Directors excluding the nominee
directors, the Chief Financial Officer and the Company secretary
(vii)
Organization structure of the Issuer and its principle business;
(viii)
Future outlook/business strategy of the Issuer;
(ix)
Highlights of major restructuring, if any, like merger, demerger, amalgamation, acquisition, reorganization, financial
restructuring etc;
(x)
Five years financial highlights relating to cash flows and financial & operating position of the Issuer including key
financial ratios like debt/equity ratio (pre & post issue), current ratio, return on equity, Earning Before Interest, Tax,
Depreciation and Amortization (EBITDA),return on assets, earning per share; debt service coverage ratio, interest
service coverage ratio etc. in tabular form;
(xi)
Salient features of the Issue and the Debt Security like issue size, tenure, rate of mark-up/ return/interest, nature of
the instrument whether it is secured or un-unsecured, redeemable or perpetual, convertible or non-convertible,
options like put option, call option/early redemption option, partial call option etc.;
(xii)
Redemption schedule;
(xiii) Detail of the redemption reserve, if any;
(xiv) Terms & conditions for investment in the Debt Security;
(xv)
Purpose of the issue & breakup of the utilization of the proceeds of the Issue;
(xvi)
In case the proceeds of the Issue are to be utilized for project financing, detail of such project like project cost &
means of financing (i.e. Financial Plan), project implementation schedule, latest status of the implementation of the
project, expected date of completion of the project, expected date of trial & commercial production etc.;
(xvii)
In case of issuance of the Debt Security by a Special Purpose Vehicle, detail of the
parties to the transaction and role of each of such party, etc.;
securitization transaction,
(xviii) Five years financial projections (i.e. Balance Sheet, Income Statement, cash flow statement and statement on
changes in equity) including key financial ratios;
(xix)
Complete credit rating report of the entity and the instrument based on the Issuer’s latest audited accounts and duly
reviewed if older than six months. In case where the instrument and entity rating is obtained from more than one
credit rating agencies, all the ratings, including the unaccepted rating(s), shall be disclosed;
(xx)
Detail of security, if applicable, backing the instrument like nature of assets hypothecated, book value of such assets,
nature of charge created in favour of the Debt Securities Trustee (i.e. exclusive, parri passu or ranking), nature and
amount of the existing charge(s) on the assets, names of the creditors who hold charge on these assets and status
of NOC/consent of the existing creditors, creditor-wise and nature-wise break up of total existing debts etc.;
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(xxi)
Name of the Debt Securities Trustee, date of execution of the Trust Deed, authority of the Debt Securities Trustee
under the Trust Deed, security enforcement mechanism by the Trustee in case of default by the Issuer;
(xxii) All the risk factors associated with the investment in the Debt Security of the Issuer and their mitigants;
(xxiii) Basic information about the industry the Issuer belongs to, key players in the industry, basic raw material used by the
Issuer, if any, and list of supplier thereof, main clients of the Issuer, competitors of the Issuer, etc.;
(xxiv) Summary of all the material contracts relating to the Issue and the project, if any;
(xxv) Names and contact details of the Issuer’s bankers, legal advisors, transfer agent and consultants to the issue;
(xxvi) Name(s) and contact details of the persons authorized by the Issuer in respect of offering/issuance of the Debt
Security;
(xxvii) The Issuer’s behavior towards servicing of existing debts i.e. the mark up and principal amount on existing term loans
and Debt Securities issued by it is paid on time.
Please note that the Information Memorandum should not contain any clause which is inconsistent with the terms of
the Debt Security and the Trust Deed including its covenants
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Annexure-III
FORMAT OF UNCONDITIONAL UNDERTAKING ON NON-JUDICIAL STAMP PAPER OF THE REQUIRED VALUE
[Clause (vi) of Annexure-I]
UNDERTAKING
The General Manager,
Karachi Stock Exchange Limited,
Karachi.
I, on behalf of … (Name of the Issuer) (the Company) … duly authorized by its Board of Directors hereby undertake that:
(i)
the Company is authorized by its Memorandum of Association to issue the Debt Security;
(ii)
the Company shall ensure that the information provided in the documents along-with the application is true, correct and
complete in all respect;
(iii) the Company shall provide all the information/documents to the Exchange, Debt Security Trustee and/or the Debt Security
holders in the form and manner as required under these Regulations;
(iv) the Company shall, all the time, comply with the requirements of these Regulations;
Dated:
Name and signature of the Chief Executive Officer of the Company
duly authorized by its Board of Director
Place:
Name and signature of the Company Secretary or Chief Financial
Officer of the Company duly authorized by its Board of Director
Common Seal of the Company
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Chapter 6: GOVERNMENT DEBT SECURITIES (GDS) MARKET REGULATIONS
6.1.
DEFINITIONS:
In this chapter, unless the subject or context otherwise requires:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
(v)
6.2.
“BATS” means Bond Automated Trading System introduced by the Exchange, which is governed under the Bond
Automated Trading System Regulations of the Exchange (BATS Regulations), as amended from time to time;
“Buying Capacity” means the confirmation received from a Clearing Participant identifying the right (capacity) of an
Eligible Client to acquire Government Debt Securities to the extent laid down in that confirmation;
“Clearing Participant” means a Commercial Bank or a Central Depository Company maintaining cash account with
Bank(s) authorized by the Exchange in accordance with procedure laid down in clause 6.4. to facilitate settlement of
trades in Government Debt Securities;
“Commercial Bank” means a Banking Company as defined in the Banking Companies Ordinance, 1962;
“Custody Position” means the confirmation received from a Clearing Participant identifying availability of
Government Debt Securities in the IPS Account of an Eligible Client as its right to sell such securities to the extent
laid down in that confirmation;
“Designated Product for GDS Market” means any of the Government Debt Securities quoted on the Exchange for
trading in its GDS Market and declared eligible for market making by the Exchange;
“Designated Broker” means a Broker performing market making activities on behalf of a Commercial Bank being
Trading or Clearing Participant through a bilateral arrangement between them, who shall make available two ways
RFQ orders either sequentially or simultaneously in the Designated Product for GDS Market;
“Eligible Client” means customers having IPS Accounts with any Clearing Participants for holding portfolio of
Government Debt Securities for trading through GDS Market at the Exchange;
“Government Debt Security” means a debt security such as Treasury Bill (T-Bill), Pakistan Investment Bond (PIB),
Government of Pakistan (GOP) Ijara Sukuk and any other debt instrument issued by the Federal Government,
Provincial Government, Local Government/Authority and any other statutory bodies;
“IPS Account” means Investor Portfolio Securities Account enabling customers to maintain their Pak Rupee (Rs.)
denominated Government Debt Securities with Primary Dealers, Commercial Banks and CDC who are authorized
by SBP to have SGLA with SBP;
“Market Maker for GDS Market” means a Trading Participant appointed by the Exchange to undertake Market
Making in Designated Product for GDS Market under clause 6.11. or a Trading Participant which is a Primary
Dealer;
“Market Making Agreement for GDS Market” means an agreement executed between the Market Maker (other than
Primary Dealers) for GDS Market and the Exchange to perform Market Making activities under these Regulations;
“Market Making Order/Quote” means providing two-way quotes by a Market Maker for the purchase and sale in the
Designated Products for GDS Market;
“Proprietary IPS Account” means an account in which a Commercial Bank being Trading Participant or CDC holds
only those securities it is holding on its own behalf;
“RFQ” means a Request For Quote which is a functionality available in the BATS as ascribed in chapter 8B of the
KSE Regulations;
“RTGS System” means Real Time Gross Settlement (RTGS) System provided by SBP to the Commercial
Bank/CDC or any other financial institution, which is a mechanism that enables participants to make payments
and/or transfer Government Debt Securities to one another electronically on real-time;
“SBP” means the State Bank of Pakistan;
“SGLA” means Subsidiary General Ledger Account opened by the Commercial Banks or CDC with SBP to facilitate
operations of IPS Accounts for holding of Government Debt Securities for their Proprietary Accounts and
Investors/customers;
“Shut Period” means a duration during which Government Debt Security is blocked for movement from one IPS
Account to other IPS Account as prescribed by SBP;
“Tick Size” means the minimum price increase or decrease at which RFQ can be made in GDS Market on BATS;
“Trading Participant” means a Broker or Banking Company authorized by the Exchange in accordance with
procedure laid down in clause 6.3. to trade in Government Debt Securities through BATS;
“Trading Workstation” means such trading workstation provided to Trading Participants by the Exchange.
GOVERNMENT DEBT SECURITIES ELIGIBLE FOR TRADING UNDER THESE REGULATIONS:
The following Government Debt Securities shall be eligible to be quoted for trading on GDS Market of the Exchange:
(a)
(b)
(c)
(d)
6.3.
Treasury-Bill (T-Bill)
Pakistan Investment Bond (PIB)
GOP Ijara Sukuk
Any other Government Debt Security authorized by SBP and allowed for trading by the Exchange with the
approval of the Commission from time to time.
TRADING PARTICIPANTS:
The following shall be eligible to become Trading Participants to trade in Government Debt Securities in GDS Market on
BATS through Trading Work Stations provided by the Exchange:
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All Brokers who meet the criteria as specified in Schedule-1, are eligible to participate in the GDS Market of the
Exchange for trading in their Proprietary Accounts or in the accounts of the Eligible Clients having IPS Accounts
and/or Cash Accounts with any Clearing Participant;
(b) All Commercial Banks who fulfill the criteria developed by the SBP for this purpose and are approved by the
Commission for proprietary trading in Government Debt Securities.
(a)
6.4.
CLEARING PARTICIPANTS:
The following shall be eligible to become Clearing Participants to settle trades in Government Debt Securities in GDS
Market on BATS:
(a)
(b)
6.5.
The Commercial Bank which is authorized by the SBP and permitted by the Commission .
The CDC.
PROCEDURE FOR ADMISSION OF TRADING PARTICIPANT AND CLEARING PARTICIPANT:
A broker which is eligible to become a Trading Participant in accordance with regulation 6.3. above shall apply to the
Exchange as per the format prescribed by the Exchange from time to time.
(b) Commercial Bank which is eligible to become a Trading Participant in accordance with regulation 6.3. above shall
apply to the Exchange on a standardized form as set out in Annexure-A along with an unconditional undertaking to
the Exchange as set out in Annexure-B.
(c) CDC or any other Commercial Bank which is eligible to, become Clearing Participant in accordance with regulation
6.4 above, shall enter into a Service Level Agreement with the Exchange on the format prescribed by the Exchange
from time to time.
(d) On completion of all the relevant requirements;
(a)
The Broker shall be allowed to become Trading Participant for trading in its Proprietary Account or on behalf of
Eligible Clients having IPS Accounts and/or Cash Accounts with any Clearing Participant.
(ii) The Commercial Bank which has applied for Trading Participant shall be allowed to become Trading Participant
for its Proprietary Account in GDS Market of the Exchange.
(iii) The Commercial Bank which has applied for Clearing Participant shall be allowed to become Clearing
Participant for its IPS Account holders including its proprietary IPS Account.
(iv) CDC shall be allowed to become Clearing Participant for its IPS Account holders including its Proprietary IPS
Account.
(i)
6.6.
TRANSMISSION OF INFORMATION BETWEEN THE EXCHANGE AND CLEARING PARTICIPANT:
The Exchange shall enter into a Service Level Agreement with its Clearing Participant for exchanging the following
information of Eligible Clients between the Exchange and Clearing Participant relating to trading and settlement of trades
in GDS Market:
Clearing Participant will transmit one day before the execution of trade the details of pre-existing interest of their
Eligible Clients including Buying Capacity of an Eligible Client, who intends to buy any Government Debt Security or
Custody Position of an Eligible Client, who intends to sell any Government Debt Security in GDS Market through
BATS on next Trading Day;
(b) The Exchange will upload such information on its BATS trading platform against UIN accounts of the respective
buyer or seller of Government Debt Securities before opening of market on Trade Day (T+0);
(c) Trading Participant except those Commercial Banks who fulfill the criteria developed by the SBP for Trading
Participants on the Exchange, will be restricted to enter RFQ on BATS for selling up to the maximum Custody
Position and for buying under clause 6.12.2. (a) upto the maximum Buying Capacity of a respective UIN uploaded in
BATS trading platform in accordance with the procedures.;
(d) The Exchange will transmit executed trades to the respective Clearing Participant on real-time basis.
(a)
6.7.
RIGHTS & OBLIGATIONS OF TRADING PARTICIPANT, CLEARING PARTICIPANT AND ELIGIBLE CLIENT:
(a)
(b)
(c)
(d)
(e)
A Clearing Participant shall enter into a Tripartite Agreement with an Eligible Client and its Broker admitted as
Trading Participant by the Exchange specifying the rights and obligations of all parties to the Agreement for sharing
of information between the Exchange and Clearing Participant, executing trades in the specified Government Debt
Security by the Eligible Client through a Broker Trading Participant and settlement of such trades by the Clearing
Participant without obtaining trade details from its Eligible Client;
Trading or Clearing Participants would be allowed to perform their respective functions subject to these regulations;
Trading Participant may apply to the Exchange to acquire Trading Workstation on such terms and condition as may
be prescribed by the Exchange from time to time;
In accordance with the Tripartite Agreement, a Clearing Participant shall be responsible for the clearing and
settlement obligations of all trades of Eligible Clients executed by the Trading Participant based on the information
exchanged with the Exchange by such Clearing Participants subject to initiation/affirmation by the counter Clearing
Participant in RTGS System. The Clearing Participant shall provide to the Exchange details of all Eligible Clients in
accordance with the procedures prescribed by the Exchange;
The Brokers as Trading Participants shall ensure that order instructions required under relevant regulations and
procedures of the Exchange dealing with the manner of giving order by the clients to the Broker are obtained from
the Eligible Clients before placement of same on the GDS Market and shall maintain relevant record or documents
with regard to the fulfillment or otherwise of the orders;
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The Brokers as Trading Participants shall make available to their Eligible Clients the order confirmation in the
manner prescribed by the Exchange in accordance with chapter 4 of the KSE Regulations;
(g) All Trading Participants shall be responsible for the accuracy of orders entered into the GDS Market;
(h) Whenever a Trading Participant puts an order in GDS Market on BATS on behalf of an Eligible Client it shall enter
the client code duly tagged with the UIN of such client.
(f)
6.8.
DEALINGS ON THE GDS MARKET:
(a)
(b)
(c)
(d)
(e)
(f)
Trading on the GDS Market of the Exchange shall be allowed only through approved Trading Workstation(s) of a
Trading Participant.
Each Trading Participant shall be assigned a participant identification code by the Exchange and the same shall be
used to log on (sign on) to BATS for accessing GDS Market.
The permission to use the Trading Workstation shall be subject to payment of such charges as the Exchange may
prescribe from time to time.
A Trading Participant shall not have any title, ownership-rights or interest with respect to GDS Market, its facilities,
software and the information/data generated by the GDS Market.
A Trading Participant shall not, by itself or through any other person on its behalf, publish, supply, show or make
available to any other person or reprocess, retransmit, store, manipulate or use the facilities of the GDS Market or
the information provided by the Exchange except with the explicit approval of the Exchange and in the ordinary
course of business to complete the transactions on the Exchange.
The Exchange shall provide its services on a best effort basis. However the Exchange shall not be liable for:
Failure of the system or for any loss, damage, or other costs arising in any way out of telecom network or
system failure including failure of ancillary or associated systems, or fluctuation of power, or other
environmental conditions;
(ii) Accident, loss in transportation, neglect, misuse, errors, frauds of the Trading Participant or its employees or
agents or any third party;
(iii) Any fault in any ancillary or associated equipment (either supplied by the Exchange or approved by the
Exchange) which forms or does not form part of the Trading Workstation installation; or
(iv) Act of God, fire, flood, war, act of violence, or any other similar occurrence; or any incidental, special or
consequential damages including without limitation of loss of profit.
(i)
Without prejudice to anything contained in clause (f) above, such failure shall not reduce, alter the liability of the
Trading Participant in respect of any trade to which it is a party.
(h) No Trading Participant shall deal on or access the GDS Market or related facilities through or on behalf of another
Trading Participant.
(i) The Exchange shall have a right to reject any application made under these Regulations or at any time withdraw any
approval previously granted, or suspend a Trading Participant temporarily from having access to the system. Such
suspension may be conditional and may be revoked on the fulfillment of condition specified, if any, to the satisfaction
of the Exchange.
(g)
6.9.
REQUEST FOR QUOTATIONS (RFQ):
(a)
A Trading Participant shall initiate RFQ to any of the selected Trading Participant(s) or to the whole market. The
RFQ initiator shall have the right to accept or reject any or all bids or offers.
(b)
PRICE QUOTATIONS:
The price quotations shall be in the manner prescribed by the Exchange from time to time.
(c)
RFQ MARKETABLE LOTS:
The following will be Marketable Lots of Government Debt Securities for RFQ Orders through BATS:
T-Bills will be allowed at minimum of Face Value (FV) of Rs.50,000/- with an increment of Rs.5,000/- or its
multiple thereof i.e., Marketable lots may be of FV Rs.50,000/-, FV Rs.55,000/-, FV Rs.60,000/- so on and so
forth.
(ii) PIBs will be allowed at minimum of FV of Rs.100,000/- or multiple thereof.
(iii) GOP Ijara Sukuk will be allowed at minimum of FV of Rs.100,000/- or multiple thereof.
(i)
(d)
RFQ TICK SIZE:
The Exchange shall prescribe the Tick Size in RFQ for all eligible Government Debt Securities from time to time.
6.10. TRADING HOURS OF GDS MARKET:
The Exchange shall announce the Trading Hours in advance. The Exchange may extend, advance or reduce Trading
Hours by notifying to all Trading Participants, Clearing Participants and Trading and Clearing Participants with the
consents of the Clearing Participants, as and when it deems fit and necessary.
6.11. APPOINTMENT OF MARKET MAKER AND ANCILLARY MATTERS THEREOF:
(a)
A person shall be eligible to apply for appointment as a Market Maker if such person is:
(i)
A Broker admitted as Trading Participant who is a member of the Financial Market Association of Pakistan;
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(ii) A Commercial Bank being a Trading Participant.
(iii) A financial institution which satisfies the eligibility criteria devised by the Exchange with prior approval of the
Commission. In such case, the application shall be accompanied with prior written consent from Designated
Broker.
(b)
The Exchange shall invite applications from eligible Market Maker (other than Primary Dealers) (hereinafter referred
to as the “Applicants”) who are desirous to act as Market Makers for GDS Market.
Provided that all Primary Dealers which are Trading Participant shall be classified as Market Maker for GDS Market
by virtue of them being a Market Maker allowed by SBP under the Rules Governing Primary Dealer System;
(c)
The Applicant shall provide to the Exchange the following, along-with the application:
(i)
(ii)
(d)
Application for appointment as a Market Maker as per form prescribed by the Exchange from time to time; and
Undertaking to comply with these regulations and to adhere to Market Making Agreement as per form
prescribed by the Exchange;
The Applicant shall provide to the Exchange the following along-with the application:
Name(s), address(es), qualification(s) and contact detail(s) of Market Maker’s agent(s) and/or trader(s)
authorized for Market Making activities;
(ii) In case of a financial institution, prior written consent of the Designated Broker;
(iii) Name(s), address(es), qualification(s) and contact detail(s) of staff members having at least three years of
relevant experience of trading in Government Debt Securities.
(i)
(e)
For GDS Market, the Market Makers shall be required to quote two-way prices within the spread limits prescribed by
the Exchange from time to time, in line with the Rules Governing Primary Dealer System of SBP. For GDS Market,
the minimum order size for quoting two-way prices shall be shall be Rs. 100,000 for T-Bills and PIBs for all Market
Makers of the government debt market.
(f)
The Applicant shall be obliged to provide any missing or additional information within such time as may be specified
by the Exchange. In case the Applicant fails to comply with the requirements of these Regulations and/or provide the
required information/ documents within the specified time or any extension thereof, the application shall stand
rejected.
(g)
The Exchange may require the Applicant to demonstrate to its satisfaction that it is suitably qualified to make a
market in the Designated Product in respect of which the application is made. Further, the Exchange may conduct
the on-site inspection to ensure the availability of requisite infrastructure of the Applicant, other than the Commercial
Bank who fulfills the criteria developed by SBP to act as Trading Participant on the Exchange.
(h)
If the Exchange is satisfied that the Applicant is eligible to carryout Market Making activities and the requisite
documents including Market Making Agreement have been submitted as required under these regulations, the
Exchange shall appoint such Applicant as Market Maker for a period of one year renewable every financial year and
communicate the same in writing to the Market Maker specifying the date and time of commencement of its term as
Market Maker.
(i)
A Market Maker may resign after three months of commencement of its term by providing the Exchange at least two
months’ prior written notice along with the reasons for resignation and specifying the effective date of resignation,
provided that a substitute Market Maker in the Designated Product acceptable to the Exchange is ready to take the
outgoing Market Maker’s role and responsibilities for the remaining period of the said term.
(j)
In case of renewal of a Market Making Agreement, the Market Maker shall submit request for reappointment at least
two months prior to the expiry of previous appointment and the Exchange shall decide such renewal request before
one month of expiry of its tenure. Alternatively where a Market Maker does not wish to continue as Market Maker, it
shall have to inform the Exchange about its intention before the commencement of last quarter of its tenure. The
market shall be intimated about a new appointee, 30 days prior to its formal functioning as a Market Maker.
Provided that in case of a Commercial Bank who fulfills the criteria developed by SBP for Trading Participant,
requirement relating to prior notice of its intention for discontinuance as Market Maker in GDS Market shall be in
accordance with Rules Governing Primary Dealer System of SBP.
(k)
The Exchange may, from time to time, prescribe or modify the following:
(i)
(ii)
The evaluation criteria for evaluation of application for appointment of Market Maker; and
The criteria for evaluation of performance of the Market Maker(s).
6.12. RISK MANAGEMENT OF TRADES IN GOVERNMENT DEBT SECURITIES UNDER THESE REGULATIONS:
6.12.1. All sell trades in GDS Market shall be subject to full Custody Position on T-1.
6.12.2. The buy trades in GDS Market shall be subject to:
(a) full Buying Capacity on T-1; or
(b) full Buying Capacity on T+1 within specified time period in case of inadequate Buying Capacity on T-1.
6.12.3.
All trades in GDS Market under clause 6.12.1. and 6.12.2.(a) shall be subject to a pre-verification by the Exchange as
provided in regulation 6.13.(b)(ii) below and shall not be subject to any margin requirements. The counter-Trading
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Participants to these trades shall prescribe their own procedures for managing settlement risk of trades executed or
settled between them without any exposure to the Exchange.
6.12.4.
All trades in GDS Market under clause 6.12.2.(b) shall be subject to deposit of pre-trade margin by the Trading
Participant with the Exchange in the form of Cash and/or highly liquid government securities at such rate as specified by
the Exchange from time to time. In case the buyer fails to deposit with Clearing Participant the amount required to settle
the buy trade within specified time on settlement date, the Clearing Participant shall send such information to the
Exchange as a failed trade. In such situation, the Exchange shall approach the Market Maker(s) for GDS Market for
settling such failed trade as per the prior arrangement made by the Exchange with the Market Maker(s) for this purpose.
The pre-trade margin deposited by the original buyer shall be forfeited by the Exchange as a penalty for non-settling the
trade maximum up to such rate as agreed with the Market Maker as a compensation for settling the failed trade.
6.13. TRADING, CLEARING AND SETTLEMENT PROCEDURES:
(a)
SETTLEMENT CYCLE:
All trades in GDS Market shall be settled on T+1 basis or as per the Settlement Cycle notified by the Exchange with
the consents of the Clearing Participants and prior approval of the Commission, from time-to-time.
(b)
TRADE EXECUTION PROCESS:
(i)
All Eligible Clients and the Brokers admitted as Trading Participants shall authorize under the Tripartite
Agreement, their Clearing Participants to disclose to the Exchange their Custody Position in Government Debt
Securities and/or Buying Capacity (cash position) available with such Clearing Participant at the end of Trading
Day - 1 (T-1).
(ii)
All RFQ bids/offers through Brokers as Trading Participants shall be subject to a pre-verification by the
Exchange for good funds and/or good security at order level on the basis of information received from the
Clearing Participants.
(iii) The Trading System shall separately indicate the buy orders in GDS Market as with full Buying Capacity and
without full Buying Capacity.
(c)
TRADE SETTLEMENT PROCESS:
All trades on GDS Market shall be settled on trade-for-trade basis.
(i)
Intra Clearing Participant Settlement Process:
All trades executed between two Eligible Clients having their IPS Accounts with the same Clearing Participant
and all trades executed between Proprietary IPS Account of a Clearing Participant and Eligible Clients having
IPS Account with such Clearing Participant shall be cleared and settled by intra accounts movement of
Government Debt Security in their respective IPS Accounts and cash in their respective bank accounts.
(ii)
Inter Clearing Participant Settlement Process:
All trades executed between two Eligible Clients having their IPS Accounts with two different Clearing
Participants shall be settled by their respective Clearing Participants on Delivery-Verses-Payment (DVP) basis
through RTGS System. Similarly, trade executed between Proprietary IPS Account of one Clearing Participant
and Proprietary IPS Account of other Clearing Participant or an Eligible Client having IPS Account with such
other Clearing Participant, or vice versa, shall be settled by their respective Clearing Participants on DeliveryVerses-Payment (DVP) basis through RTGS System of SBP.
(d)
DEAL TICKET CONFIRMATION PROCESS:
(i)
Respective Trading Participants will confirm all trades in the Government Debt Securities executed in GDS
Market by the Eligible Clients on the basis of Deal Ticket of the executed trade generated through GDS Market
having all trade settlement related information as per trade confirmation procedure of the Exchange.
(ii)
Respective Clearing Participant will confirm all trades settled through them to their respective Eligible Clients as
per their confirmation procedure.
6.14. SHUT PERIOD:
The Exchange may announce a Shut Period during which trading of specified Government Debt Security will remain
suspended on the GDS Market of the Exchange.
6.15. INITIAL DEPOSIT, TRADING FEE AND OTHER CHARGES:
The Exchange shall prescribe, from time to time, initial deposit payable by the Trading Participants, trading fee on the
value of the transaction and other charges payable by such Trading Participant on services provided by the Exchange as
per the Deposit, Fee, Contribution and other Sums Schedule.
6.16. OVERRIDING EFFECT:
The provision of these Regulations shall have overriding effect and nothing contained in any other regulations of the
Exchange for the time being in force shall be applicable in so far as these Regulations are concerned.
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Annexure-A
FOR APPROVED BANKS
FORM OF APPLICATION FOR TRADING PARTICIPANT OF THE EXCHANGE
The Managing Director
Karachi Stock Exchange Limited.
Stock Exchange Building
KARACHI
Dear Sir,
We hereby apply to participate in the trading of Government Debt Securities Market as a Trading Participant of the Karachi
Stock Exchange Limited to trade in our proprietary account.
We are enclosing herewith the following documents required for the aforesaid purposes:
a.
b.
c.
Memorandum and Articles of Association
An Unconditional undertaking under the Common Seal of the company duly signed on the prescribed format
copy of approval by Commission
We hereby undertake to abide by the Regulations Governing Government Debt Securities (GDS) Market of Karachi Stock
Exchange Limited which are in force or may be amended from time to time by the Exchange.
Yours faithfully,
Name:
_______________________________
Dated:
_______________________________
Signature: _______________________________
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Annexure-B
FORM OF UNCONDITIONAL UNDERTAKING
(For Trading Participant)
In pursuance to the Regulations Governing Government Debt Securities Market of the Karachi Stock Exchange Limited, we
____________________ having our registered office at ______________________________________ hereby undertake and
bind ourselves as under:
1.
That we undertake to comply with the Regulations Governing Government Debt Securities Market of the Exchange.
2.
That we understand our Trading participant status at the Exchange does not confer any trading rights or
responsibilities for equity related or any other market of the Exchange.
3.
That we undertake to fulfill all our obligations as laid down under the Rules/Regulations of the Exchange, CDC as well
as SECP and SBP as may be prescribed from time to time.
Yours faithfully,
____________________________
Chief Executive/Authorized person
_________________________
Common seal of the company
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FORM-C
FORM OF APPLICATION FOR APPOINTMENT AS MARKET MAKER
The General Manager
Karachi Stock Exchange Limited
KARACHI
APPLICATION FORM FOR APPOINTMENT AS MARKET MAKER
We hereby apply for the appointment of Market Maker at the Karachi Stock Exchange Limited in accordance with the
Regulations Governing Government Debt Securities Market of Karachi Stock Exchange Limited. Our brief particulars are as
under:
1.
Complete company name (no abbreviations)
2.
Company registration number
3.
Name of the Designated Broker through which market making will be carried out (in the case of Market Maker is a
financial institution).
__________________________________
Name and Signature of Authorized Person
Date:
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Schedule-1
CRITERIA FOR SELECTION OF STOCKBROKERS ELIGIBLE FOR TRADING OF GOVERNMENT DEBT MARKET
The applicant must:
1.
be registered with the SECP as a Broker under the Brokers and Agents Registration Rules, 2001;
2.
have net-equity of not less than of Rs. 20 million as per the latest audited financial statements at the time application to
the Exchange for becoming its Trading Participant under the Regulations governing Government Debt Securities Market
of the Exchange. All Brokers being Trading Participants shall be required to furnish a statement to the Exchange on
quarterly basis for maintaining that balance;
3.
have adequate capital market and money market experience;
4.
have adequate infrastructure available to carry out trading activities in government securities including functional website,
internal control procedures and technological and human resources to facilitate the trading of government securities and
an adequate risk management system to measure and manage risk emanating from trading in these securities;
5.
not have been declared defaulter/expelled or its TRE Certificate forfeited/cancelled due to noncompliance with any
provision of the relevant rules and regulations, directives and circulars of the SECP as amended from time to time and/
or not defaulted on the settlement of arbitration award in respect of Investor claims;
6.
The directors/sponsors/substantial shareholders of the applicant have not held the office of the directors or have been
sponsors/substantial shareholders in any TRE Certificate Holder (or a Member prior to the date of demutualization),
which had been declared defaulter or expelled or its TRE Certificate forfeited/cancelled by the Exchange.
Explanation: For the purpose of this chapter the term “Substantial Shareholder” shall mean shareholder having more
than 10% shareholding in the TRE Certificate Holder’s company.
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Chapter 7:
7.1.
PROPRIETARY TRADING REGULATIONS
DEFINITIONS:
7.1.1. In this chapter, unless there is anything repugnant in the subject or context:
(a)
(b)
(c)
(d)
“Associated Person" shall mean any partner, employee, officer or director of a Broker;
"At Best Order” shall mean an order to buy or sell a security as soon as possible at the best available market price;
"Limit Order" shall mean an order to buy or sell a security at a specified price or better price;
"Proprietary Trading" shall mean trading conducted by a broker, agent or an associated person on his own account
for direct gain instead of commission from clients.
7.1.2. All other words and expressions used but not defined in these rules shall have the same meanings as are assigned to
them in the Companies Ordinance, 1984 (XLVII of 1984) and the Securities and Exchange Ordinance, 1969 (XVII of
1969).
7.2.
PROCEDURE FOR EXECUTION OF PROPRIETARY TRADING BY THE BROKER OR ITS AGENT OR ANY
ASSOCIATED PERSON:
7.2.1. All orders to buy or sell securities that a Broker, Agent or an Associated Person may place shall be entered, in the
chronological order in an order register (either manual or electronic) and/or order log maintained by telephone recording
to be maintained by the Broker in a form which shows the name of the person who placed the order and the time at
which the order is received, the name and number of securities to be bought or sold, nature of the transaction clearly
indicating in writing a proprietary trade transaction and the limitation, if any, as to the price of the securities or the period
for which the order is to be valid.
7.2.2. MANNER OF TRANSACTIONS OF BROKERS’ BUSINESS:
(a)
A Broker, Agent or an Associated Person who has an "At Best" Order from a customer to buy or sell a security shall
not, while such order remains unexecuted, engage in Proprietary Trading in such security or trading for the Broker
for which he is a partner or for the account of any of the partners therein or for any account in which he, such Broker
or partner, directly or indirectly, has an interest.
Provided, if a Broker, Agent or an Associated Person who has his own “At Best” Order to buy or sell a security prior
to an order from a customer, the same shall have priority over the “At Best” Order of that customer subject to
disclosure of such an order by the Broker, Agent or an Associated Person to his customer.
(b)
A Broker who has a Limit Order from a customer to buy or sell a security shall not while such order remains
unexecuted, engage in Proprietary Trading involving the sale or purchase of that security at the limit price or a better
price than the limit price specified by the customer for himself or for the Broker for which he is a partner or for the
account of any of the partners therein or for any account in which he, such Broker or partner, directly or indirectly,
has an interest.
7.2.3. A Broker who has an order to buy or sell a security shall not fill such order by engaging in Proprietary Trading for himself
or for the Broker for which he is a partner or for the account of any of the partners therein or for any account in which he,
such Broker or partner, directly or indirectly, has an interest, except when:
(a)
the order is a Limit Order;
he sells the security at a price not exceeding the price at which the transaction immediately preceding the
receipt of the order by him actually took place;
(ii) he buys the security at a price which is not less than the price at which the transaction immediately preceding
the receipt of the order by him actually took place; or
(iii) the Broker trades in the capacity of a Market Maker in accordance with chapter 12 pertaining to Market Makers
of these Regulations.
(i)
7.3.
NO AGGREGATION OF ORDERS:
A Broker shall not aggregate an order for a customer with orders for other customers, or with own account orders.
7.4.
CONFLICT OF INTEREST AND DISCLOSURE BY BROKERS:
7.4.1. The Broker shall disclose to his customer placing an order in a particular security, while accepting such order, whether
he intends to or is carrying out Proprietary Trading in that security on that particular day.
7.4.2. The Broker, if doing Proprietary Trading through Agents/traders, shall disclose the name(s) of such persons to his
customers.
7.5.
SEPARATE ACCOUNT FOR PROPRIETARY TRADING:
Every Broker who engages in Proprietary Trading shall have a separate account. The account shall be in the name of the
Broker, Agent or an Associated person and the title of the account must contain the word "proprietary". The account(s)
shall be used for all transactions involving Proprietary Trade.
7.6.
MARKET INTEGRITY:
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7.6.1. INSIDER DEALING:
No Broker shall, directly or indirectly, deal in any listed security or cause any other person to deal in securities of such
company if he has information which:
(a)
(b)
is not generally available; and
would, if it were so available, be likely to materially affect the price of those securities.
7.6.2. Broker, Agent or an Associated Person to keep accounts: Every broker shall maintain separate books of accounts for:
(a)
(b)
7.7.
Money received from or on account of and money paid to or on account of each of his clients; and
The money received and the money paid on a Broker, Agent or an Associated Person's own account.
PENALTY:
If a Broker contravenes with any provisions of this chapter as the case may be, disciplinary actions shall be taken in
accordance with the provision available in the chapter 20 relating to disciplinary actions against TRE Certificate Holders
of these Regulations.
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Chapter 8:
(A) KARACHI AUTOMATED TRADING SYSTEM (KATS) REGULATIONS
8.1.
DEFINITIONS:
8.1.1.
This chapter shall apply to the Brokers in respect of trading conducted through KATS.
8.1.2.
In this chapter, unless there is anything repugnant in the subject or context:
(a)
(b)
(c)
8.2.
“Disaster” means a situation in which the primary site of the Automated Trading System of the Exchange becomes
inoperative or in-accessible for any reason, as may be declared by the Exchange or intimated by the Broker to the
Exchange;
“Order” means a valid sale or purchase order placed by a Broker through KATS;
“Special Terms Orders” means an order which has special conditions for trading.
ELIGIBILITY:
The Exchange shall notify the securities that shall be eligible for trading on the KATS.
8.3.
AVAILABILITY:
8.3.1.
The Exchange will make available KATS to the Brokers by providing trading workstation connections. The number of
trading workstations for each Brokers shall be decided by the Board.
8.3.2.
Every TRE Certificate Holder registered as Broker with the Securities & Exchange Commission of Pakistan under the
Brokers’ and Agents Registration Rules, 2001 shall mandatorily get and maintain one Disaster Recovery (DR) Terminal
at a remote place outside the Exchange premises, which shall be connected to DR Site of the Exchange.
However, such DR Terminal:
(a)
(b)
If installed at the place other than the registered Office/Branch Office of the Brokers shall be ‘view only’ terminal
during normal operations of the Exchange and will be activated only for trading purposes during the period of
Disaster declared by the Exchange or intimated by the Broker to the Exchange. While activating DR Terminal for
trading purposes, Exchange shall ensure that normal trading workstations are not connected with KATS. As soon as
the Exchange or the Brokers declares removal of Disaster status, the DR Terminal will be switched-back to ‘view
only’ from the ‘trading’ terminal;
If installed at the registered Office/Branch Office of the Brokers, it will function as a normal trading workstation
connected with the KATS during normal operations of the Exchange and will be switched over to DR Site of the
Exchange during the period of Disaster.
8.3.3.
The Exchange may shutdown automated trading in the event that KATS is inoperative or inaccessible to more than such
number of trading workstations as may be prescribed by the Board.
8.3.4.
If the Board is satisfied that the trading through KATS cannot be resumed within reasonable time then the Board may
allow the trading in the Exchange on the conventional outcry system for such time as it deems fit.
8.4.
TICK SIZE:
The Tick Size will be 1 (one) paisa for all orders placed on KATS, unless otherwise specified in the relevant Regulations
governing a specific Market.
8.5.
QUEUE PRIORITY:
8.5.1.
Orders that cannot be immediately executed shall be queued for future execution in a specific order of priority mainly
based in the following order:
(a)
(b)
Price
Time of entry
Any other factors affecting the order of Queue Priority shall be determined and notified by the Exchange with the prior
approval of the Board.
8.5.2.
In case an Order is executed partly, the remaining part of such Order shall not lose its priority.
8.5.3.
The Queue Priority shall be determined by KATS through an interactive process and the order of priority displayed by
KATS shall be conclusive except in the case of manifest error which shall be determined by the Board.
8.6.
INSERTION OF CLIENT'S CODE IN EVERY BID AND OFFER THROUGH KATS:
8.6.1.
Every Broker while inserting a bid and offer through KATS for each of his clients, shall insert unique Client Codes for
those clients which are maintained by them in their back office system and registered with NCCPL. These Client Codes
are linked/mapped to UIN through the interface of NCCPL. These Client Codes should not be re-assigned to another
client of the Brokers even after the closure of the account.
8.6.2.
Every Broker shall ensure that the shares purchased or sold against a Client Code are posted to the respective SubAccount/Investor Account of that particular client with CDC upon settlement of trades through the Exchange.
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8.7.
DISCLOSED AND UNDISCLOSED VOLUME:
8.7.1.
An Order may specify the total share volume and may specify a lesser amount that is disclosed to the market. The
disclosed volume shall not exceed the total volume.
8.7.2.
Total and disclosed volume of an Order must be a marketable lot.
8.7.3.
An increase in disclosed volume will cause a new time stamps and change in Queue Priority but a decrease in disclosed
volume will not cause a new time stamp or change in Queue Priority.
8.8.
TIME IN FORCE RESTRICTION:
8.8.1.
All Orders shall be valid only for the relevant trading day unless a time restriction is specified otherwise in which case
such Order shall be automatically removed on the close of the day or after expiry of the specified time, as the case may
be, if it remains unfilled till then.
8.8.2.
Terms allowed for Time in Force Restriction include:
(a)
(b)
(c)
(d)
(e)
(f)
8.9.
Day
Good Till Cancelled (GTC) (i.e. Open)
Good to Date (Month-Day-Year) (GTD)
Good for Week (GTW)
Good for Month (GTM)
Fill or Kill (FOK)
CROSS TRADE:
Cross Trades are trades entered between two clients of the same Broker. Such trades shall be allowed only if the Orders
are placed and executed according to regular Order matching principles prescribed for all KATS Orders.
8.10.
CANCEL ORDER:
A Cancel Order can only cancel an outstanding Order and cannot cancel a trade completed with the specified Order. It
will not act as a Cancel Trade Request if that Order has already traded.
8.11.
CHANGE FORMER ORDER (CFO):
8.11.1. The terms of an Order posted to the KATS cannot be changed except by the Change Former Order (CFO) option.
8.11.2. The options available for CFO shall be notified by the Exchange from time to time.
8.12.
SETTLEMENT:
The Settlement of the trading through KATS shall take place as per the existing rules and regulations of the Exchange as
amended or substituted from time to time.
8.13.
NEGOTIATED DEAL:
8.13.1. Negotiated Deal shall not participate in the open market but trade throughout the hours of operation of the Exchange and
thereafter until a time set by the Exchange.
8.13.2. Price protection procedures shall not apply to Negotiated Deals.
8.13.3. Negotiated Deal shall have no minimum volume requirements.
8.13.4. A Negotiated Deal will trade in its entirety as if it were an All or None (AON) transactional partial fills and undisclosed
volumes shall not be allowed.
8.13.5. Negotiated Deals will be between two separate brokerage houses otherwise the same shall be treated as Cross Trade.
8.13.6. Negotiated Deal can be an Odd Lot.
8.13.7. All unconfirmed Negotiated Deals will be cancelled when the KATS engine is dumped.
8.14.
SPECIAL TERMS ORDERS:
8.14.1. A Special Terms Order shall not be shown as part of the normal round lot Order book but will be maintained in a Special
Terms Order book that can be viewed separately from the round lot book.
8.14.2. The options available for Special Terms Order shall be notified by the Exchange from time to time with the prior approval
of the Board.
8.15.
OPENING:
8.15.1. Pre-Open Session consists of following periods:
Order Entry Period: During this period, the Orders are entered and queued and Order execution, modification or
cancellation is disallowed. Market orders and Special Term Orders are not allowed during this period.
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Order Matching and Confirmation Period: During this period, the opening price is calculated as per the requirements
of these regulations. The Orders entered during Order Entry Period are matched at the opening price so calculated and
confirmed. New Order entry, modification or cancellation is disallowed during this period.
8.15.2. Where a market imbalance exists, an opening price will be chosen by KATS through an interactive process.
8.15.3. Once the opening price is chosen, all trading shall take place at that single opening price and no price level transition will
be allowed.
8.15.4. If the orders are not entered during Pre-Open session the last day Closing Price or last traded price of previous trading
session, whichever is applicable, would be the Open Price till the first trade occurs in the scrip in open state. Once trade
occur in the open state the first trade price becomes the Opening Price of the scrip with the exception that the first trade
shall not be Cross Trade in nature.
8.15.5. Opening Price Calculation: The Opening Price for scrip is determined by a four step approach involving the use of
conditional decision rules. If a clear result cannot be achieved when the first decision rule is applied, the mechanism
progresses to the second decision rule and so forth. The decision rules are applied in the order provided hereunder.
Each symbol has only one Opening Price. The Opening Price is calculated based on the available orders in the regular
book. To calculate the Opening Price, the following rules are applied:
i.
ii.
iii.
iv.
At each price level the total volume available in the market is calculated. The total volume available is determined
separately for both buy and sell side of the market. The price level that allows the maximum volume of shares to
trade is the Opening Price.
If more than one price level allows the maximum volume of shares to trade then the price level that has the minimum
imbalance in share volume becomes the Opening Price. Imbalance in share volume is the number of shares
remaining after all trades occur at a particular price level.
If more than one price level allows the maximum volume of shares to trade and have an equal minimum imbalance
in share volume, then the price level with the least net change from the Closing Price of previous day or from last
trade price of previous trading session, whichever is applicable, becomes the Opening Price.
If more than one price level allows the maximum volume of shares to trade, have an equal minimum imbalance in
share volume, and have an equal least net change from the previous day Closing Price or last trade price of
previous trading session, then the highest price level becomes the Opening Price.
8.15.6. Orders Not Completely Filled: All Orders entered during the Pre-Open Session will have a time priority based on the
actual time of entry. For Orders not completely filled at the Pre-Open, this time priority will be maintained thereafter
during the trading day/trading session. Limit Orders entered during the Pre-Open are subject to the same procedures
that govern their entry during the trading day.
8.15.7. Open Session: After the completion of Order Matching and Confirmation Period the Open Session will commence for
regular trading activity subject to these Regulations.
Notwithstanding anything contained above, all Orders entered during Order Entry Period that remain unfilled during PreOpen session shall not be cancelled/modified for three minutes immediately after start of the Open Session or for such
time period as specified by the Exchange with prior approval of the Commission from time to time
8.15.8. Frozen Trades: The Exchange can define parameters that can cause any trade that violates them to be “frozen” so that
it can be examined before they decide to allow it or prevent it. This is based on such things as a drastic change in the
trade price or an extremely high volume. The monitoring that takes place during the trading day is also in effect during
the open. Any trade that violates freeze parameter at the open will result in a freeze. All the trading done for the open of
the current company is placed on hold until the Exchange decides how to proceed. Only the specific company is frozen.
8.16.
HALTS:
8.16.1. Trading in each company can be halted on demand by the Exchange.
8.16.2. A halt can be instituted for a company at any time during the trading day. Once halted, no further trading in the company
will take place unless the halt is removed.
8.16.3. All Orders may be cancelled globally by the Exchange at the discretion of the Exchange.
8.16.4. Cancellation messages shall be forwarded to the traders.
8.16.5. The Exchange may, in the interest of the market, put a halt on trading by any Broker under the KATS.
8.16.6. Order entry or reinstatement may take place during the halt period.
8.17.
GENERAL:
8.17.1. A Broker shall be responsible for all orders entered from his trading workstation(s).
8.17.2. The Board may issue any guidelines and clarifications from time to time for removal of any difficulties in the execution or
operation of these regulations.
8.17.3. The terms and phrases used herein without a specific definition shall have the meaning in accordance with current trade
practice.
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8.17.4. Any determination made by KATS through an interactive process shall be conclusive.
8.17.5. Any dispute between a Broker or an Authorized Agent and his client, arising out of or in connection with the trade
executed under this chapter and which is not otherwise settled amicably, shall be referred to arbitration and dealt with
according to the arbitration procedures laid down in chapter 18 of the KSE Regulations.
8.17.6. Notwithstanding anything contained in these regulations the Exchange may in its sole discretion cancel any order (before
or after settlement) with the prior approval of the Board.
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Chapter 8:(B) BONDS AUTOMATED TRADING SYSTEM REGULATIONS
8B.1.
DEFINITIONS:
8B.1.1.
In this chapter, the following expressions shall, unless the context requires otherwise, have the meanings herein
specified below:
(a)
“Order” means a valid sale or purchase order placed by a Broker through its BATS trading terminal.
8B.1.2.
All other words and expressions used and not defined in the Regulations shall have the same meanings as are
assigned to them in the Securities and Exchange Ordinance, 1969 and any other applicable laws.
8B.2.
ADMINISTRATION & EXERCISE OF POWERS:
The Exchange may exercise the following powers in operating and administrating BATS:
To amend these Regulations and make new Regulations with prior approval of the Commission;
To release information in its possession concerning any TRE Certificate Holder and all activities of the Broker on
BATS to persons authorized by law to request for such information;
(c) To impose fees in relation to the use of the facilities available on BATS.
(a)
(b)
8B.3.
DEBT MARKET SECURITIES (“SECURITIES”):
Debt Market Securities which are allowed to be traded at the Exchange would include Corporate Debt Securities such
as Term Finance Certificates (TFCs), SUKUK Certificates (Sharia Compliant Bonds), Registered Bonds, Commercial
Papers, Participation Term Certificates (PTCs) and all kinds of debt instruments issued by any Pakistani or foreign
company or corporation registered in Pakistan.
8B.4.
ELIGIBILITY OF SECURITIES:
The Exchange shall notify the securities that shall be eligible for trading on the BATS, with prior approval of the
Commission.
8B.5.
AVAILABILITY:
8B.5.1.
Any Broker of the Exchange can enter into Debt market under these Regulations if he notifies to the Exchange in
writing of such desire.
8B.5.2.
The Exchange will make available BATS to the Brokers for trading in eligible debt securities by providing trading
workstation connections. The number of trading workstations for each Broker shall be decided by the Board.
8B.5.3.
The Exchange may shutdown automated trading in the event that the BATS is inoperative or inaccessible to more than
such number of trading workstations as may be prescribed by the Board.
8B.6.
ORDER/TRADE PRICES AND DATABASE FOR ACCRUED INTEREST CALCULATIONS:
Trading prices of Debt Market Securities shall be based on principal amount only whereas accrued interest
calculations shall be made on the basis of settlement date of the open transaction. Following shall apply:
(a) AUTOMATIC ORDER MATCHING METHOD: quote up to a four-digit price (e.g. 100.1234)
(b) TICK SIZE: Rs. 0.0001
8B.7.
ORDER TYPES AND ATTRIBUTES FOR DEBT TRADES:
8B.7.1.
Orders will be matched on a strict price/time priority basis.
8B.7.2.
Debt Market Securities will trade in decimal increments to 4 decimal places (e.g. 101.3213).
8B.7.3.
All or None, Limit Orders, Market Orders, Change Former Order (CFO), contingent Orders (Stop Loss Market If Touch
(SLMIT), Cancel Order (CXL), Cancel Order Globally (COG) and Global Order state change are allowed.
8B.7.4.
Modification of price in CFO would be subject to fill allocation priorities; however reduction of bid/offer quantity shall not
be subject to the fill allocation priorities.
8B.8.
QUOTE TYPES, ATTRIBUTES FOR DEBT MARKET TRADES AND CONFIDENTIALITY:
8B.8.1.
Functionality for Requests for Quotations (RFQ) shall be available in the BATS .
Explanation: RFQ comprises of transmitting a request for bid or offer through BATS to other market participants and
subsequent receipt of quotes from market participants in respect of a BATS eligible security.
8B.8.2.
A Broker may initiate RFQ from maximum ten other identified market participants or the whole market. The RFQ
initiator shall have the right to accept or reject any or all bids or offers. The acceptance of bid or offer by an RFQ
initiator shall result in a binding trade.
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8B.8.3.
BATS shall treat all data and commercial information placed in the Trading System by market participants as strictly
confidential. To achieve this objective, the Trading System shall adopt the most suitable organization, procedure and
technological processes.
8B.9.
QUEUE PRIORITY:
8B.9.1.
Orders that cannot be immediately executed shall be queued for future execution in a specific order of priority mainly
based on the following order:
(a)
(b)
Price
Time of entry
Any other factors affecting the order of queue priority shall be determined and notified by the Exchange with the prior
approval of the Board and the Commission.
8B.9.2.
In case an Order is executed partially, the remaining part of such Order shall not lose its priority.
8B.9.3.
The queue priority shall be determined by BATS through an interactive process and the order of priority displayed by
BATS shall be conclusive except in the case of manifest error which shall be determined by the Board.
8B.10.
INSERTION OF CLIENT'S CODE IN EVERY BID AND OFFER THROUGH BATS:
8B.10.1. Every Broker, while inserting a bid and/ or an offer through BATS for each of his clients, shall insert unique Client
Codes for those clients which are maintained by them in their back office system and registered with NCCPL. These
Client Codes are linked/mapped to UIN through the interface of NCCPL. These Client Codes should not be reassigned to another client of the Broker even after the closure of the account.
8B.10.2. Every Broker shall ensure that the Securities purchased or sold against a Client Code are posted to the respective
Sub-Account/Investor Account of that particular client with CDC upon settlement of trades through the Exchange.
8B.10.3. The above requirements shall also apply in case of inter exchange trades.
8B.11.
DISCLOSED AND UNDISCLOSED VOLUME:
8B.11.1. An Order may specify the total debt market security volume and a lesser amount that is disclosed to the market. The
disclosed volume shall not exceed the total volume.
8B.11.2.
An increase in disclosed volume will cause a new time stamps and change in queue priority but a decrease in
disclosed volume will not cause a new time stamp or change in queue priority.
8B.11.3. The maximum Order size for Corporate Debt Securities shall be Rs. 100 Million and 40% of which can be specified as
disclosed volume.
8B.12.
CROSS TRADES:
Cross Trades are trades entered between two clients of the same Broker. Such trades shall be allowed only if the
Orders are placed and executed according to regular Order matching principles of price and time priority as prescribed
for all BATS Orders.
8B.13. CANCEL ORDER:
A Cancel Order option can only cancel the unfilled order(s) or its portion and it will not act as a Cancel Trade Request
if that Order has already been executed.
8B.14.
CHANGE FORMER ORDER (CFO):
The terms of an Order posted to the BATS cannot be changed except by the Change Former Order (CFO) option.
CFO option can only be exercised in respect of unfilled order(s) or its portion.
8B.15.
TIME IN FORCE RESTRICTION:
8B.15.1. All Orders shall be valid only for the relevant trading day unless a time restriction is specified otherwise in which case
such Order shall be automatically removed on the close of the day or after expiry of the specified time, as the case
may be, if it remains unfilled till then.
8B.15.2.
Terms allowed for Time in Force Restriction include;
(a)
(b)
(c)
(d)
8B.16.
Good till Day (GTD)
Good till Week (GTW)
Good till Month (GTM)
Good till Cancel (GTC)
MARKET OPENING:
Debt market shall only have two states i.e. open and close. (no pre-open, pre-close and open-close states).
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8B.17.
MARKET HALTS:
8B.17.1. The trading in a security/securities can be halted at the discretion of the Exchange at any time during trading hours,
through a Notice and /or announcement. During a market halt the market status will be displayed as HALT and no
further trading in the security/ securities will take place unless the halt is removed. The Exchange can subsequently lift
these halts and the market will return to its state prior to imposing the halt.
8B.17.2. All orders may be cancelled globally by the Exchange at discretion of the Exchange.
8B.17.3. Cancellation messages shall be forwarded to all Brokers trading on BATS.
8B.17.4. The Exchange may, in the interest of the market, put a halt on trading by any Broker under the BATS.
Provided that in case the Board decides to halt the market for more than 24 hours, the same shall be implemented with
the prior written approval of the Commission.
8B.18.
NEGOTIATED DEAL:
8B.18.1. Negotiated Deal shall not participate in the open market but trade throughout the hours of operation of the Exchange
and thereafter until a time set by the Exchange.
8B.18.2. Price protection procedures shall not apply to Negotiated Deals.
8B.18.3. All Negotiated Deals executed shall be mandatorily reported to the Exchange on the same day in the manner as
prescribed by the Exchange.
8B.18.4.
Only the securities in physical form (not available in book-entry) shall be traded through Negotiated Deal and
settlement of the same shall take place between the respective parties.
8B.19.
FEES:
Trading fees will be levied at the rate of 0.005% of the securities’ trading value, or as may be prescribed by the Board
from time to time.
8B.20.
RISK MANAGEMENT, CLEARING AND SETTLEMENT:
The risk management, clearing and settlement of all transactions entered and executed on BATS shall be governed by
the rules, regulations and procedures of the NCCPL.
8B.21.
GENERAL:
8B.21.1. A Broker shall be responsible for all Orders entered from his trading workstation(s).
8B.21.2. The Board may issue any guidelines and clarifications from time to time for removal of any difficulties in the execution
or operation of these regulations.
8B.21.3. The terms and phrases used herein without a specific definition shall have the meaning in accordance with current
trade practices.
8B.21.4. Any determination made by BATS through an interactive process shall be conclusive.
8B.21.5. Any dispute arising out of or in connection with the trade executed under these regulations shall, within two trading
days of arising of such dispute, in the first place be referred to a committee constituted by the Board. Any party
dissatisfied with the decision of the aforesaid committee may, within ten days of such decision, appeal to the Board.
8B.21.6. Notwithstanding anything contained in these regulations, the Exchange may in its sole discretion cancel any Order
(before or after settlement) with the prior approval of the Board.
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Chapter 9:
9.1.
INTERNET TRADING REGULATIONS
DEFINITIONS:
9.1.1. In this chapter the following expressions shall, unless the context requires otherwise, have the meanings specified herein
below:
“Configuration Management” shall mean a process in which the service provider has to undertake a change or add
new functionality to the system or the infrastructure;
(b) “Internet Based Trading Services (IBTS)” shall mean services associated with internet based trading for the purpose
of routing orders to Trading Systems through an automated order routing system as provided for under these
regulations;
(c) “Operational Capacity” shall mean the number of clients supported by the solution and infrastructure, usually
assessed by the number of parallel requests served per seconds.
(a)
9.2.
APPLICABILITY:
9.2.1. This chapter shall apply to all the Brokers, their authorized representatives and the facilities or services established by
the Brokers for providing IBTS in the securities traded on the Exchange.
9.2.2. Brokers already engaged in providing IBTS, shall evidence their compliance with all requirements of this chapter within
six months from 18th July, 2012.
9.3.
ELIGIBILITY:
A TRE Certificate Holder, who is a Broker and fulfills the following minimum conditions, may apply for providing IBTS:
have minimum net worth of Rs. 25 million as per the latest audited financial statements;
have adequate infrastructure including functional website, internal control procedures and technological and human
resources to facilitate the operations of IBTS in an effective and efficient manner on an ongoing basis;
(c) have well-defined procedures for allowing clients’ access to IBTS which shall inter-alia cover the following aspects:
(a)
(b)
(i)
(ii)
(iii)
(iv)
(v)
Agreement with the Broker;
Assigning of trading limits;
Placement and execution of clients’ orders;
Mode and timing of reporting of trade confirmation to the clients;
Margin requirement (Initial, maintenance and other applicable margins) and margin calls.
The above procedures should be in writing and made available on the Broker’s website for easy access by the clients.
9.4.
PROCEDURE FOR THE COMMENCEMENT OF INTERNET BASED TRADING SERVICES:
9.4.1. The Broker desirous of providing IBTS may submit an application to the Exchange to provide IBTS in the format as may
be prescribed by the Exchange from time to time for seeking formal permission. The Broker shall also provide further
information or documents as and when required for disposal of the application.
9.4.2. The Broker shall undertake all the certification procedures as specified by the Exchange from time to time. A completion
certificate shall also be submitted to the Exchange prior to the commencement of IBTS which may be scrutinized by the
Exchange as and when deemed appropriate in accordance with its procedures.
9.4.3. Upon completion of the certification requirement by a Broker who also fulfills the above eligibility conditions, the
Exchange shall, in writing either grant approval or reject the application as the case may be, within 30 calendar days of
the date of submission of the application to the Exchange.
9.4.4. The Broker may after obtaining permission for installation and maintenance of the system for IBTS, deposit the requisite
fees with the Exchange. The Exchange shall decide the amount of the installation and maintenance fees from time to
time.
9.4.5. The Exchange shall display the list of Brokers eligible for providing IBTS on its website and update the same upon any
addition and/or deletion therein.
9.5.
BROKER CLIENT SERVICE ARRANGEMENT:
9.5.1. The Broker shall have an agreement with the client to whom it offers IBTS, which would contain appropriate disclosures
highlighting the risks associated with internet trading.
9.5.2. The Broker shall have appropriate arrangements in place to assess a client’s suitability to undertake internet based
trading and have sufficient and verifiable information of each client for risk evaluation purposes.
9.5.3. The Broker providing IBTS shall provide access to the clients to all the applicable rules, regulations, guidelines of the
Exchange and Commission, information regarding the rights and obligations of the Investors and the Broker; Investor’s
guides issued by the Exchange and the Commission, relevant legal provisions for Investor protection and the complaint
handling and arbitration procedures.
In addition to the above, the Broker shall also disclose to the clients the information relating to UIS Services of NCCPL
and SMS, IVR and Investor Account services of CDC.
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9.5.4. The Broker shall disclose to its clients availing IBTS the Service Level Agreements and the infrastructure provided by the
third-party vendor, if any.
9.5.5. The Broker shall keep in record for the period of at-least five years all IBTS information relating to client orders and
communications with the clients along with proper security measures to prevent such record from any potential misuse.
9.6.
SERVICE REQUIREMENT:
The Broker providing IBTS shall ensure that:
Satisfactory arrangements are in place so that it can at all times uniquely identify each and every order during the
different stages of processing.
(b) Orders placed through its systems are fairly allocated in accordance with the rules/regulations/procedures of the
Exchange.
(c) Effective audit trail is maintained to address risks arising from:
(a)
(i)
(ii)
(iii)
(iv)
the opening, modification or closing of a client account;
any transaction with significant financial consequences;
any authorization granted to a client to exceed a limit;
any granting, modification or revocation of systems access rights or privileges.
Adequate risk management systems are in place for controlling product-wise trading limits and exposure of clients
availing IBTS. The system shall be capable of monitoring trading activities of such clients in leverage and derivative
products offered through IBTS.
(e) Internet trading system is capable of assessing the risk of the client on real-time basis at order entry level. The client
shall be informed of acceptance/rejection of the order instantaneously. In case an order is rejected due to the
system based controls because of client having exceeded limits etc., the system may allow a review and release
facility for enabling the order to pass through.
(f) Provision of user manual of IBTS containing complete system and interfaces documentation on its website.
(g) System based reports on margin requirements, payment and delivery obligations etc. are disseminated to the client
in a timely manner.
(h) Any error or omission in the system shall not indemnify the Broker from the responsibility of settling any trade.
(d)
9.7.
INFORMATION AND INFRASTRUCTURAL SECURITY MEASURES:
The Broker providing IBTS shall ensure that:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
The internet trading system is in compliance with the information security policy of the Exchange and the service
provider/Broker.
The encryption technology applies for all client orders entered into the system and for all other confidential
information the system is capable to uniquely identify each client of the Broker. For this purpose, appropriate
technical and administrative controls are also implemented to protect the clients against identity theft and related
compromises.
Firewalls are in place to prevent intrusions by unauthorized persons. The firewall policy shall be adequately defined,
maintained and reviewed periodically.
The system is configurable to allow auto-logoff in case of inactivity of the trading terminal and/or the trading website.
Implementation of first and second level passwords and PIN requirement at order placement level are implemented.
Functionality of automatic expiry of passwords at the end of a reasonable duration and re-initialization of access on
entering fresh passwords are implemented.
All transaction logs with proper audit facilities are maintained in the system.
Appropriate technical controls are in place against:
(i)
(ii)
(iii)
(iv)
(v)
9.8.
Presentation of incorrect data, intentionally or malevolently;
False presentation or the use of incomplete information for transactions;
Manipulation of any data;
Viruses/Malware, leading to any loss of data, unauthorized access to data, or threat of unavailability of systems;
Cyber extortion (distributed denial of services/distributed agent-based attacks).
OPERATIONAL CAPACITY:
9.8.1. The Broker providing IBTS shall ensure that its Operational Capacity is evaluated regularly and that it maintains the log
of evidences of such activities which shall include but not be limited to the following:
(a)
(b)
(c)
Details of the procedures for undertaking such an evaluation;
The time at which such evaluation is undertaken;
A copy of the results of such evaluation.
9.8.2. The Broker providing IBTS shall continuously update and enhance the Operational Capacity in line with the increasing
quantum of trades being generated through IBTS.
9.9.
SERVICE AVAILABILITY AND BUSINESS CONTINUITY:
The Broker providing IBTS shall ensure that:
(a)
Service is available in the following events:
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(i)
(ii)
Website is not accessible thereby barring trading, receiving or providing information;
Particular section(s) of the website are not accessible due to either denial of service or lack of capacity
or inability of the service providers to provide timely access to website;
Satisfactory alternative arrangements and contingency plans are in place to make sure that IBTS can continue in the
event of a large-scale disruption (Disaster Recovery Planning/Business Continuity Planning).
(c) Appropriate arrangements are in place where disruption of service is witnessed on the part of vendor.
(d) Information regarding any disruption in the online trading services either on part of the Broker or the third-party
vendor, is immediately disclosed on its website and to its clients.
(b)
9.10. SYSTEMS MODIFICATION:
The Broker providing IBTS shall submit to the Exchange and disclose on its website, in advance or promptly as the case
may be, the information relating to any significant changes (Major Release) to its systems and the reasons for the
change, availability or revocation of any specification/facility, delay in placement of orders/execution of trades etc. The
changes in the system must comply with the configuration management policy of the service provider/Broker.
9.11. MONTHLY REPORTING:
The Broker providing IBTS shall maintain monthly reports on the reliability and compliance status of the service. The
report shall inter-alia include:
Number of users of the system as at the end of the month;
Daily average number of transactions (of all types) processed by the system during the month and the highest
number of transactions processed by the system on a single day during the month;
(c) Percentage of the scheduled time for availability for which the service was not available;
(d) Number of incidences in which the system remained partially or fully inaccessible for trading;
(e) Reason for non-availability, if any; and
(f) System modifications, if any and its impact on the existing services.
(a)
(b)
9.12. PERIODIC AUDIT, VULNERABILITY ASSESSMENT AND PENETRATION TESTING:
9.12.1. The Broker shall ensure that its IBTS systems, controls and procedures are audited and penetration tested
independently, once in every two years, by an audit firm approved by the Exchange.
9.12.2. The Broker shall submit report of the auditor to the Exchange within two months of the date of the close of its periodic
vulnerability assessment, if not assessed by the Exchange itself.
9.13. GENERAL DISCLOSURES:
9.13.1. The Broker providing IBTS shall ensure that its website contains following information in plain English and Urdu
language and in an easily accessible form:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
A basic explanation of securities trading; including definitions of common terms used on the trading screen;
A general statement and information regarding the manner, in which orders are accepted, processed, settled and
cleared via the internet;
Disclosure of various risks of securities trading, including the risk of systems outages and failures and any
alternative means of placing orders;
Procedures to cancel pending orders during a system failure;
Rules and regulations affecting inter-alia client broker relationship, arbitration procedures and any other useful
information from the perspective of Investor protection;
Hyperlink to the websites/page on the websites of the Exchange and the Commission displaying relevant rules,
regulations, guidelines of the Exchange and Commission, information regarding the rights and obligations of the
Investors and the Broker; Investor’s guidelines issued by the Exchange and the Commission, relevant legal
provisions for Investor protection and the complaint handling and arbitration procedures etc.;
Hyperlink to the websites/page on the websites showing information relating to UIS Services of NCCPL and SMS,
IVR and Investor Account services of CDC.
9.13.2. The Broker providing IBTS shall ensure that the ticker/quote/order book displayed on its website displays the time
stamp as well as the source of information against any given information.
9.13.3. The Exchange shall have system available to ensure on real time basis that all the information as prescribed under
these regulations are properly disclosed and updated from time to time by the Broker on its website.
9.14. CROSS TRADES:
The Broker shall ensure that the IBTS systems for routing client orders shall not be allowed to cross trade its clients’
orders with each other. All orders must be offered to the market for matching.
9.15. SUSPENSION AND CANCELLATION OF INTERNET TRADING CERTIFICATE:
9.15.1. The Exchange shall assess the effectiveness of systems and processes of the Broker providing IBTS in accordance
with the procedures devised from time to time and approved by the Board.
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9.15.2. The Exchange may suspend the internet trading certificate of a Broker if it violates any of the regulations, and such
suspension shall continue until and unless the Broker complies with the regulations it has violated or removes the cause
of suspension in the manner as prescribed by the Exchange.
9.15.3. The Broker may appeal to the Exchange for the revival of the Internet Trading Certificate.
9.16. INFORMATION ACCESSIBILITY:
To assist the Exchange or Commission in investigating instances of suspected or potential abuses such as insider
trading and market manipulation, the Broker providing IBTS shall provide full and prompt responses to all requests for
information by the Exchange or the Commission as the case may be.
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Chapter 10:
READY DELIVERY CONTRACTS MARKET REGULATIONS
10.1. DEFINITIONS:
“Physical Securities” shall mean listed securities which are in physical form and are cleared and settled through the
Exchange.
(b) “Sale with Pre-existing Interest” shall mean:
(a)
The squaring up of an earlier purchase on the same exchange in the same settlement.
The squaring up of an earlier purchase on the same exchange in a different settlement which will settle prior to
the settlement of the sale.
(iii) The squaring up of an earlier purchase on another exchange in a different settlement which will settle prior to
the settlement of the sale.
(iv) The squaring up of an earlier purchase on another exchange in the same settlement.
(v) The squaring-up of an open position in Margin Trading Market as a financee on account of same UIN of same
security.
(i)
(ii)
10.2. BASIC DEPOSIT:
A TRE Certificate Holder admitted as Broker desiring to become eligible for trading under Ready Delivery Contract
Market shall be required to submit application along with basic deposit as per Deposits, Fee, Contribution and other
Sums Schedule for the time being in force.
10.3. READY DELIVERY CONTRACT TRADING:
10.3.1. Trading in Ready Delivery Contracts shall be conducted under these Regulations with such modifications, alterations and
additions as may be made from time to time by the Board with prior approval of the Commission.
10.3.2. Trading in Ready Delivery Contracts shall take place through KATS.
10.3.3.
When a buyer/seller accepts offer/bid of a Ready Delivery Contracts, the said Contract shall be deemed to
have taken place between the buyer and the seller.
10.3.4. All offers/bids made may be accepted for up to the limit of the offer/bid and the Broker making an offer/bid shall be bound
by the terms of the Ready Delivery Contracts.
10.3.5. All trades in the Ready Delivery Contract Market shall be conducted by Brokers for and on behalf of their clients or for
their own proprietary position under registered client codes duly mapped with the UIN.
10.4. STANADARDIZED MARKETABLE LOTS:
10.4.1. BOOK-ENTRY SECURITIES:
The Exchange shall notify from time to time the securities which are eligible for trading at the Ready Delivery
Contract Market;
(b) The Exchange shall allow its Brokers to trade Book-entry Securities through its Ready Delivery Contract Market in
the Marketable Lots or multiple thereof as prescribed in the following schedule:
(a)
PRICE RANGE
Upto Rs.100
Above Rs.100 up to Rs.500
Above Rs.500 up to Rs.1,000
Above Rs.1,000
(c)
MARKETABLE LOTS
500 shares
100 shares
50 shares
20 shares
The following shall be applicable on Book-entry Securities with Marketable Lots of more than one:
(i)
The Clearing Company shall determine Marketable Lots based on the Closing Prices of the Securities at the
Exchange as of June 30 and December 31 every year. On the basis of which the Clearing Company will notify
the Marketable Lots to all market participants. Such Marketable Lots may be determined uniformly by the
Clearing Company for all Stock Exchanges, where these Securities are listed at the review date based on the
Closing Prices of the Securities at the Exchange.
(ii)
The Marketable Lot shall be revised after giving at least 30 days’ notice in advance in coordination with the
Clearing Company.
The Exchange may allow the Brokers to trade Odd Lots of all Book-entry Securities through an Odd Lots Market at
the Exchange provided that Brokers, for its single account on UIN basis, will be allowed to sell Odd Lots
accumulating to full the Marketable Lot of a Security during whole trading day through Odd Lots Market, However, a
Broker may buy Odd Lots accumulating to Marketable Lot of a Security for its single account on UIN basis.
(e) The Exchange will transmit all trades executed either in Marketable Lots or Odd Lots to the Clearing Company for
their clearing and settlement on NCSS in accordance with NCCPL Regulations and Procedures there under.
(d)
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10.4.2. PHYSICAL FORM SECURITIES:
(a)
The Exchange shall allow its Brokers to trade shares in physical form in exceptional circumstances such as the buyback of physical shares as per these Regulations, through the Ready Delivery Contract Market in Marketable Lot as
prescribed by the Exchange from time to time.
(b)
The Clearing House will clear and settle trades in Physical Form Securities with following mechanism:
(i)
(ii)
(c)
Every buying Broker will be required to settle his money obligations with the Clearing House, which may be
determined after taking into account all applicable fees and charges as prescribed under Deposits, Fee,
Contribution and other Sums Schedule and other taxes/levies etc. Provided such Broker has delivered its all
net-sold Securities as per instructions issued through Delivery Orders of respective settlement date.
Every selling Broker shall be required to deliver shares to the buying Brokers as per the instructions issued by
the Clearing House through Delivery Orders.
If the delivery is made pursuant to a sale in Ready Delivery Contract Market in lots smaller than Marketable Lots, the
buying Broker cannot refuse the delivery, if the lots delivered can be rounded-up into a Marketable Lot or multiple
thereof. The buying Broker, however, shall have the right to deduct the extra transfer fees, if charged, under
whatever name, at the rate levied by the company concerned, if there are more than one transfer form.
The deduction in respect of extra transfer forms, if any, involved in delivery of Lots smaller than Marketable Lots but
rounded-up into a Marketable Lot, shall not be permissible if transfer fee is not charged by the company concerned.
(d)
Once a Physical Form Security is declared as an Eligible Book-entry Security by the CDC, the Exchange will not
allow any physical settlement of trades taking place on or after the eligibility date in such security.
10.5. TRADING AND SETTLEMENT CYCLE:
10.5.1. FOR BOOK-ENTRY SECURITIES:
Ready Delivery Contracts in a Book-entry Securities executed during a trading day shall be settled on T+2
Settlement Cycle through NCSS unless NCCPL in coordination with the Exchange decides otherwise in accordance
with NCCPL Regulations and NCSS Procedures made thereunder.
(b) Ready Delivery Contracts in a Physical Form Security executed during a trading day shall be settled on T+2
Settlement Cycle through the Clearing House in a manner prescribed by the Exchange.
(c) Ready Delivery Contract in a Security will be declared for settlement on T+1 Settlement Cycle atleast three
Settlement Days before the Book Closure start date of such Security, if its Books are closed due to determining
entitlement for shareholders by the Company.
(d) Ready Delivery Contract in a Security will be declared for settlement on T+2 Settlement Cycle on ex-entitlement
basis at least one Settlement Day before the Book Closure start date of such Security, if its Books are closed for
determining any entitlement for shareholders by the Company.
(a)
10.5.2. FOR UNPAID LETTER OF RIGHTS (LORS):
The LoRs for Book-entry Securities will be managed in accordance with the Procedures for Induction of Unpaid
Rights into CDS. However, LoRs for Physical Form Securities will be managed by the Exchange in accordance with
its own procedures.
(b) The Exchange may allow trading in the LoRs from the thirtieth (30th) Business Days prior to the last date of payment
fixed by the company and shall discontinue its trading atleast five (5) Business/Settlement Days prior to the last date
of payment.
(c) Ready Delivery Contract in the Book-entry form LoRs will be settled through the Clearing Company on T+2
Settlement Cycle. However, Physical form LoRs will be settled through the Clearing House of the Exchange on T+2
Settlement Cycle also.
(a)
10.6. DETERMINING EX-PRICE OF SECURITY ON BOOK CLOSURE–1 SETTLEMENT DAY:
If the Books of a Security are closed for determining any entitlement for its shareholders by the Company, the Exchange
shall determine the ex-price based on the mechanism prescribed by the Exchange, as an opening price for the Trading
Day falling on one Settlement Day before its Books Closure start date. However, detailed ex-price calculation
methodology shall be made available on KSE website.
10.7. SETTLEMENT FAILURE:
10.7.1. A Broker failing to settle money and/or delivery obligations on his trades in Physical Form Securities shall be dealt in
accordance with default management regulations prescribed in chapter 21 of KSE Regulations.
10.7.2. A Broker failing to settle money and/or delivery obligations on his trades in Book-entry Securities shall be dealt in
accordance with the default management regulations of the Clearing Company and Exchange.
10.8. BUYING BROKERS’ OBLIGATIONS ON RECEIPT OF PHYSICAL FORM SECURITIES:
10.8.1. MANDATORY TRANSFER OF SHARES:
In all transactions of physical shares, the buying Brokers shall be deemed to have given an undertaking to the selling
Broker that the shares shall be lodged with the issuer company for registration in the name of the buyer within fifteen
days from the date of the delivery of such shares.
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10.8.2. NOTIFICATION OF NON-DELIVERY BY THE BUYING BROKER:
Buying Brokers are required to notify to the Clearing House for non-receipt of deliveries, if any, before opening of Ready
Delivery Contract Market on next Trading Day after the Settlement Day on which fail deliveries are due.
10.8.3. BUYING IN OPEN MARKET:
On receipt of notification from the buying Broker for non-receipt of deliveries from selling Broker, the Clearing House may
initiate buy-in process in accordance with the prescribed manner, preferably on notification date, at the risk and cost of
failing selling Broker. However, the Clearing House shall be required to give notice to failing selling Broker before
initiating buy-in process and advise to deposit (in addition to the settlement obligations of undelivered securities) the nondelivery charges for each non-delivery per security at the rate as prescribed in Deposits, Fee, Contribution and other
Sums Schedule.
10.8.4. NON-ACCEPTANCE OF NOTIFICATION FOR SQUARING-UP FROM BUYING BROKER:
The Exchange shall not entertain any notification for buy-in of failed deliveries if not received before opening of Ready
Delivery Contract Market on next Trading Day after the Settlement Day on which such delivery was due.
10.8.5. FORFEITURE OF RIGHTS:
A Broker who fails to exercise his right to buy-in in the manner provided in these Regulations shall forfeit all rights of
recourse through the Exchange against the Broker in default, unless such Broker proves to the satisfaction of the Board
that he did not exercise his right to buy-in on the written request of the Broker in default.
10.8.6. DELAY IN BUYING-IN:
If the buying-in is not effected within the period prescribed in these Regulations, and if the Broker buys-in, through
Clearing House, at a later date and satisfies the Exchange that it was impracticable to buy-in earlier than he did,
Arbitration Panel may allow damages, on the footing of the rates at which the Securities were bought-in at such other
rates as the Exchange may determine.
10.8.7. TENDER BY SELLER BEFORE NOTICE:
The buying Broker must accept and pay for the Physical Form Securities any time prior to buy-in to the Exchange.
10.8.8. TENDER BY SELLER AFTER NOTICE:
If the buying Broker has issued notice of his intention to buy-in Physical Form Securities for default in delivery, and if the
selling Broker, before the securities have been bought-in, makes a proper tender of such securities, the buyer must
accept delivery and pay for such securities.
10.8.9. SECURITIES BOUGHT-IN OR SOLD-OUT BUT UNDELIVERED OR UN-PAID:
Securities bought-in but not delivered on the next business day may be again bought-in for immediate delivery
without further notice and any loss shall be paid by the Broker causing such further buying-out.
(b) Securities sold-out and not paid for on the next business day may be again sold out for immediate delivery without
further notice and any loss shall be paid by the Broker causing such further selling-out.
(a)
10.8.10. BID BY BUYER OR SELLER BARRED:
A Broker on whose account the buying-in or selling-out is affected shall not be permitted to make a bid or offer.
10.8.11. DEDUCTIONS OF DIVIDENDS:
The buyer is entitled when paying for shares on which a dividend, interest, bonus etc., has been recommended or
declared, and for which the transfer books of the company were closed before delivery, to deduct the dividend, interest,
bonus, rights etc., declared or recommended, provided that the Broker of the Exchange through whom the transaction
shall have been effected shall be personally responsible for effecting adjustments finally between the buyer and the
seller when the dividend is actually paid.
10.8.12. STAMP AND TRANSFER DEED:
Stamp duties payable under Stamp Act, 1899 as applicable to the Province of Sindh and fees charged by a Company
registering transfers of shares and known as ‘transfer fees’ shall be paid by the buyer.
10.8.13. SETTLEMENT INSIDE THE EXCHANGE:
The buying Broker or one of his authorized representatives shall be present in the Exchange premises for the purpose
of receiving delivery of securities and the selling Broker shall not be obliged to deliver the shares at the office of the
buying Broker outside the Exchange premises.
10.8.14. LIABILITIES OF BROKERS:
Brokers shall not be personally liable between themselves for interest, dividend, bonus or rights on shares sold by them
when such shares, were delivered to the buyer at least one Settlement Day before the Book Closure start date of the
company to enable the buyer to get the shares transferred to his name, but nothing in this Regulation shall affect the
rights and obligation of buyer and sellers between themselves as constituents or principals for the recovery of such
interest, dividends, bonus or rights.
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10.8.15. APPLICATION FOR RIGHT SHARES:
The buyer is entitled to new shares issued in right of old shares, provided that he specially claims the same in writing
from the seller not later than 1:00 P.M. on second day preceding the latest day fixed for receipt of applications by the
Company.
Notwithstanding the provisions of the above clause, the seller if he is in possession of the new securities, shall be
responsible to the buyer for the same, if claimed by him before 1:00 P.M. on the day following the last day fixed for the
receipt of applications by the company, and in case he is not in possession of the new securities, he is bound to
reimburse the buyer the difference between the cum-price and ex-price.
10.8.16. LETTERS OF RENUNCIATION:
Rights are to be settled by letters of renunciation when practicable, when proper letters of renunciation are delivered or
tendered to the buyer before 2:00 P.M. on the day proceeding the last day fixed for the receipt of application, the seller
shall be relieved of all further liability in respect of all such rights. A Broker shall not be bound to accept letters of
renunciation not tendered within the time provided in this Regulation.
10.8.17. NON-DELIVERY OF LETTERS OF RENUNCIATION:
If the settlement of claims to rights is not made by letters of renunciation by reason of the failure of the seller to deliver
such letters within the time prescribed above, the seller shall bear any extra expense of transfer incurred, provided that
when no letters of renunciation are issued or recognized by the company, the expenses of transfer shall be borne by the
buyer.
10.8.18. TEMPORARY SETTLEMENT:
When securities are sold cum-rights and are delivered after the closing of the transfer books for rights and when new
securities cannot be obtained by letters of renunciation, the Exchange shall fix a price which may be deducted by the
buyer from the purchase money of the old securities.
The buyer shall pay that price, namely, the balance due on the contract when the seller delivers the new securities at
any time on or before the day fixed by the Exchange for the settlement of rights.
10.9. DOCUMENTS AND REGISTRATION:
10.9.1. REGULARITY AND GENUINENESS OF DOCUMENTS:
A Broker who has received payment against delivery of necessary documents, either on his own account or on behalf of
his client, shall be personally responsible to the Broker to whom the same are delivered for their title, regularity and
genuineness. Provided that the documents shall be lodged with the company for registration by or on behalf of the
purchaser or any subsequent purchaser maximum within two years from the date of the receipt of such documents
provided however where the books of the company are closed earlier than two years for any entitlement then up to
period of book closure; or where CDC has declared the company as eligible securities for CDS earlier than two years
then within 12 months from the date of notification by CDC to declare the company as eligible for CDS, whichever comes
earlier.
If after lodging the request of transfer within the above mentioned timeframe the company returns the shares either with
or without objections or refuses to register any transfer for any reason whatsoever the selling Broker shall within seven
days of receipt of a notice from the buying Broker informing him of such return of the shares or refusal of registration by
the company, as the case maybe, replace the shares. Provided however that the buying Broker shall issue such notice
not later than fifteen days from the date of return of shares or refusal of registration, as the case maybe, by the company.
If the documents are not lodged within the prescribed periods then except in case of fraud or bad faith on the part of the
selling Broker or of his client, the liability of the selling Broker to both the buying Broker and the client and the liability of
the buying Broker to his client, shall cease in all respects.
Provided further that the date of lodgment of claim with the Exchange for replacement of shares from the buying Broker
shall be deemed to be the date for determining the liability of the selling Broker.
10.9.2. LIABILITY OF CLIENTS:
Nothing in this Regulation shall affect the liability of the Clients (which term shall in cases where a Broker has dealt on
his account include such Broker) from whom the Broker may have received the documents in any action at law or in any
other proceedings. The Broker who delivered the documents shall however be bound to render every assistance to the
buyer in any proceedings he may take against the seller.
10.9.3. REPLACEMENT OF IRREGULAR DOCUMENTS AND REFUND:
(a)
If a Broker, to whom the documents are delivered, gives intimation in writing to the Broker who delivered them of his
objections as to their title, regularity or genuineness as soon as it comes to his knowledge, the Broker who delivered
them shall within a week from the date of such intimation remove any irregularity or establish the title or genuineness
of the documents; as the case may be, or deliver other regular, genuine and valid documents, but in the event of
such Broker, failing to deliver such other documents he shall refund on return of the documents the moneys paid
against such documents provided that the documents were lodged for registration within prescribed period from the
receipt thereof as provided under regulation 10.9. above.
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(b)
A refund of the price on the return of documents shall not operate as cancellation of the contract, and if the selling
Broker within the prescribed period from the refund tenders to the buying Broker regular, genuine and valid
documents, the buying Broker shall be bound to accept such documents in fulfillment of the original contract and pay
the purchase price.
10.9.4. BUYING-IN ON NON-TENDER:
If the selling Broker fails to tender such documents within such period, the buying Broker shall be entitled to give notice
of buy-in of the securities against him to the Exchange as provided in Regulation 10.8.2. above.
10.10. SALES NOT CONDITIONAL ON TRANSFER:
Subject to the requirements of the Regulation 10.11., a sale of shares is not conditional on the Company transferring the
shares in the name of the buyer. The only obligation on the seller on the sale of shares is to tender delivery of the
genuine share certificates with a properly executed transfer deed.
Such seller shall not be deemed to guarantee that the Company will transfer the shares in the name of the buyer and
shall incur no liability by reason of the refusal of the Company in exercise of the power vested in it under its articles of
association to refuse transfer of such shares.
Explanation:
A transfer deed signed on behalf of the seller by a person purporting to be his constituted attorney shall not be
considered a properly executed transfer deed if the power of attorney in question is conditional and not absolute.
10.11. FRESH TRANSFER DEED ON REFUSAL BY COMPANY:
When a company refuses to register a transfer on the ground of any objection, the transferor shall, on request of the
transferee and on the return of original transfer deed to him for cancellation, execute a fresh transfer deed in favor of the
transferee.
10.12. COMPANY IN LIQUIDATION:
If a company has been wound up on the date of the contract or winds up during the time between the dates of the
contract and the date of Settlement, the seller shall be entitled to recover from the buyer the purchase money even
though the liquidator refuses to consent to the transfer. If the buyer cannot get the shares transferred in his name, the
seller shall, if required to do so by the buyer and at the buyer’s cost, assign his title to and his rights in such shares to the
buyer and shall execute a power of attorney in favour of buyer to enable him to recover any liquidated amount and
dividend becoming payable after the date of the contract in respect of such shares.
10.13. DISPUTE AFTER REGISTRATION:
When the official certificate of registration of securities bought has been issued by the issuer Company, neither the
selling Broker nor the buying Broker shall be personally responsible to the buyer for any subsequent dispute to the title
unless bad faith or fraud is alleged against any such Broker or unless such Broker has dealt on his own account. Nothing
in this Regulation shall affect the liability of the transferor or actual seller who may have received payment against
delivery of securities, in any action at law or in other proceedings. The provisions of this Regulation shall apply only to
the rights and obligations of Brokers inter-se.
10.14. SHORT SELLING:
10.14.1. Short Sale under Ready Delivery Contract Market shall take place through the Trading System.
10.14.2. Short Sale will only be permissible on Uptick or Zero-Plus Tick, for example:
LEVEL
A
B
C
D
E
F
G
H
I
TIME
Previous Closing
10:00 a.m.
10:02 a.m.
10:10 a.m.
10:11 a.m.
10:12 a.m.
12:00 noon
12:05 p.m.
12:10 p.m.
12:15 p.m.
RATE
19.00
19.05
19.10
19.10
19.05
19.05
19.50
19.45
18.90
18.95
REMARKS
Short Sale allowed
Short Sale allowed
Short Sale allowed
Not Allowed
Not Allowed
Short Sale allowed
Not Allowed
Not Allowed
Short Sale allowed
10.14.3. In addition to sub-clause 10.14.2. above., Short Sale shall also be allowed without Up-tick or Zero-Plus Tick up to the
following extent:
(a) UIN-WIDE POSITION: A UIN will be allowed to make short sale to the maximum extent of 2% of average daily
turnover of the respective security of previous one month.
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(b) BROKER-WIDE POSITION: A Broker for his all UINs including his clients’ positions will be allowed to make Short
Sale to the maximum extent of 4% of average daily turnover of the respective security of previous one month.
(c) MARKET-WIDE POSITION: All Brokers on cumulative basis will be allowed to make Short Sale to the maximum
extent of 40% of average daily turnover of the respective security of previous one month.
10.14.4. Provided that the exemptions mentioned in sub-clause 10.14.3. above shall not be available in the following cases:
(a) when the price of a security declines up to 2.5% from the Closing Price of the previous day, the exemptions shall not
be available for the remainder of the day;
(b) when lower circuit breaker, becomes applicable on the Closing Price of a security, the exemptions shall not be
available for the next two working days;
(c) when lower circuit breaker, becomes applicable on the Closing Price of a security consecutively for five working
days, the exemptions shall not be available for next fifteen working days after the fifth working day.
10.15. PROHIBITION ON BLANK SALES:
No Broker shall make any Blank Sale either for his own account or for his clients.
10.16. SHORT SALE PREREQUISITES:
No Broker shall make a Short Sale on his proprietary account or client’s account unless:
(a) The sale is made at an Uptick or Zero-Plus Tick; except as stated in sub-clause 10.14.3. above; and
(b) The trade is declared as a Short Sale at the time of placement of order through Trading System in a special Short
Sale Order Window designated in the system for the purpose.
(c) Short Seller will have to declare Short Sales while placing the order in the system in the manner and procedure as
may be prescribed by the Exchange from time to time. This identification would be at the trade level to the
Exchange, which would then disclose the cumulative figures for public consumption at the close of market every
day.
(d) Short Seller will have to make delivery of the net shares involved in the short selling on the day of settlement.
10.17. CRITERIA FOR SECURITIES ELIGIBLE FOR SHORT SELLING:
10.17.1. Short Sales shall only be allowed in the Securities which may be prescribed by the Exchange from time to time, based
on the criteria approved by the Board with prior approval of the Commission.
10.17.2. The Exchange shall give a reasonable prior notice to the market participants before including or excluding any security
from the list of securities eligible for Short Sales.
10.18. PROHIBITION:
No Broker who has unsettled MT Transactions as a financier on his Proprietary Account or on Clients’ Accounts against
delivery of securities shall use the same securities for Short Selling.
10.19. TEMPORARY PROHIBITION ON SHORT SALE:
The Board may with the prior approval of the Commission and after notice to the Brokers, temporarily prohibit Short
Selling completely for a specified period with any extension thereof.
10.20. DISCIPLINARY ACTION ON NON-COMPLIANCES:
In case of non-compliance/violation of the above provisions, all disciplinary actions shall be taken in accordance with the
relevant provisions available in the chapter 20 of these Regulations.
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Chapter 11:
FUTURES TRADING IN PROVISIONALLY LISTED COMPANIES
11.1. TRADING & ELIGIBILITY CRITERIA:
11.1.1. Trading in Futures Trading in Provisionally Listed Companies Market shall take place through the KATS and shall be
conducted in accordance with this chapter of the KSE Regulations.
11.1.2. A company shall be eligible for trading under these Regulations if it satisfies the following conditions:
The approved public offer including the premium amount, if any, shall not be less than Rs. 250 million.
The company’s prospectus has been cleared by the Exchange and the company has been notified by the Exchange
to be provisionally listed for trading under these Regulations from the date of publication of prospectus or a date as
may be specified by the Exchange.
Provided that in the event of non-holding of ballot for the allotment of the shares due to under subscription of the
issue / offer or in the event the number of applications received for subscription of shares is less than two thousand
five hundred, then trading in shares of a company which is provisionally listed shall be suspended by the Board till
the time the company is formally listed on the Exchange.
Notwithstanding such suspension of trading, the transactions executed before such suspension shall be deemed to
be valid and remain binding on the parties concerned.
(c) The company has not followed the process of book building for determination of offer price of the shares being
listed.
(d) The shares of such company are not already listed at the Exchange.
(a)
(b)
11.1.3. CONTRACT TRADING:
While opening trading on the provisionally listed contract, the Exchange shall notify the name of the company, date of
opening of such contract, the market lot for trading, clearing and settlement schedule, maximum number of shares that
can, at the close of any business day, remain outstanding in that scrip in any Broker’s account, the date of removal of the
company from the Futures Contract in provisionally listed companies and other relevant details governing such contracts.
Provided that the Exchange may extend the date of settlement if the company has not delivered the shares physically
and/or credited the shares into CDS as per agreed time schedule.
11.1.4. When a buyer / seller accepts offer / bid of a contract (quantity of shares) the contract with the specifications as
mentioned in Annexure-I attached hereto shall be deemed to have taken place between buyer/seller.
11.1.5. All offers/bids made may be accepted for up to the limit of the offer/bid and the Broker making an offer/ bid shall be
bound to buy or sell such quantity of contracts as is agreed to be taken up.
11.1.6. All trades in the provisionally listed companies under these Regulations shall be conducted by Brokers for and on behalf
of their clients or for their own proprietary position under registered Client Codes duly mapped with UIN.
11.1.7. CIRCUIT BREAKERS:
Circuit breakers shall be applicable as provided under chapter 19 of the KSE Regulations.
Notwithstanding anything mentioned hereinabove, no trading in the company provisionally listed under these Regulations
shall be allowed beyond the price fluctuation of 100% or Rs. 50, whichever is lower, from the first day of closing rate till
such time the company is formally listed.
11.1.8. Maximum up to 3% of shares offered to the General Public can remain outstanding at the close of any business day in a
Broker’s account and 1.5% in a single UIN’s account in a company listed under these Regulations.
11.2. DEPOSITS AND MARGINS:
11.2.1. Trading in Provisionally Listed Securities Contracts shall be subject to collection of Margins at the Pre-trade level (Order
entry level) in the manner and form as prescribed under chapter 19 of these Regulations.
11.2.2. The Exchange may allow an appropriate return to Brokers on the cash amount deposited as margin with the Clearing
House.
11.2.3. Any Broker can enter into trading in the Futures Trading in Provisionally Listed Companies Market if he notifies to the
Exchange in writing of such desire along with a basic deposit for each Security to be traded as prescribed in Deposits,
Fee, Contribution and other Sums Schedule. This deposit along with any return earned on it is to be kept separate by the
Exchange and cannot be used for purposes other than to meet any obligations of the Brokers to the Exchange arising
from the Futures Trading in this market.
Provided that the basic deposit paid by a Broker under these Regulations may be utilized against Exposure margin of
such Broker in the Futures Trading in Provisionally Listed Companies Market during the trading hours. However, the
basic deposit, so utilized, shall be replenished by the Broker at the end of each trading day.
Provided further that in case of Broker’s default, this deposit shall be utilized in accordance with the chapter 21 of these
Regulations.
11.2.4. In case a Broker delays any payment to the Exchange beyond specified time, his Initial Margin requirement (deposit
payable) will be doubled. Provided that the enhanced amount of basic deposit shall not be utilized against the Exposure
margin of such Broker.
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11.2.5. All deposits for particular scrip shall be subject to first lien for payments to be made against transactions outstanding in
that scrip.
11.3. RISK MANAGEMENT AND FINAL CLEARING & SETTLEMENT:
11.3.1. The MtM Losses shall be calculated at the end of each trading day in the manner as prescribed under chapter 19 of
these Regulations.
11.3.2. The related MtM Losses, calculated at the end of each trading day, shall be paid by the Brokers in cash to the
Exchange/NCCPL through NCSS.
11.3.3. The related MtM Profits, arising from fluctuations in price in particular scrip shall be withheld by the Exchange/NCCPL
until the final settlement of the contract(s).
11.3.4. There shall be Final Clearing on last day of the Contract Period at the weighted average rate of the trades of respective
Brokers on T+3 settlement basis.
11.3.5. The scrip-wise outstanding positions of a Broker’s proprietary account and his client(s)’ accounts shall be revalued at
respective weighted average price and shall be transferred to the NCCPL for settlement in accordance with NCCPL
Regulations.
11.3.6. The system shall consider such revalued amounts as the traded values, based on which Exposures will be calculated.
11.3.7. Total MtM Losses collected up to the Final Settlement Day on account of a particular company provisionally listed under
these Regulations shall be transferred to NCCPL for adjustment against money obligation of the Brokers on that day.
11.3.8. The Exchange may with the approval of the Board, announce a special clearing in particular scrip. In case special
clearing is announced, trading in the scrip shall be suspended until such time the outstanding MtM Losses are settled in
cash and the market shall open after the differences have been settled with the Exchange/NCCPL through NCSS.
11.4. REFUSAL OF FORMAL LISTING:
In case formal listing of any company provisionally listed is refused by the Exchange for any reason whatsoever, all
transactions made till the day of the refusal shall stand null and void. In such eventuality, all deposits and clearings,
received by the Exchange/NCCPL shall be refunded to the respective Brokers.
11.5. BROKERS’ DEFAULT:
In case of default by any Broker, default proceedings shall be undertaken by the Exchange and/or the NCCPL, pursuant
to their respective Regulations.
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Annexure-I
CONTRACT SPECIFICATIONS OF FUTURES TRADING IN PROVISIONALLY LISTED COMPANIES
Company Name
Company Code
Contract Size
Maximum Price Fluctuation During
the Contract Period
Regular Trading Hours
Daily Price Limits
Opening of Contract
Expiration Date/ Last Trading Day
Settlement
Date of Removal of Company from
Futures Contract
Maximum No. of shares that can
remain outstanding
Exposure Margins
Valid Company Name approved by the Exchange
Valid Company code assigned by the Exchange
Number of Shares
Rs. 50 or 100%, whichever is lower from the first day`s Closing Price
As prescribed in the Trading System Regulations and notified by the Exchange
from time to time.
As applicable under the Regulations Governing Risk Management of the Exchange.
Valid Date
Valid Date
Valid Date
Valid Date
The no. of shares that could remain outstanding at the close of any business day in
any Broker’s Account or in a single UIN’s Account.
As applicable under the chapter 19 of the KSE Regulations.
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Chapter 12:
MARKET MAKERS REGULATIONS
12.1. DEFINITIONS:
In this chapter, the following expressions shall, unless the context requires otherwise, have the meanings herein
specified below:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
“Designated Market Making Period” shall mean the period, designated by the Exchange, within normal trading
hours, during which the Market Maker shall have to submit both bids and offers, either sequentially or
simultaneously;
“Designated Product” shall mean any of the securities as defined in Section 2(1)(l) of Securities and Exchange
Ordinance, 1969, listed on the Exchange and declared eligible for Market Making by the Exchange with prior
approval of the Commission;
“Designated Broker” shall mean a corporate Broker performing market making activities on behalf of the financial
institution through a bilateral arrangement who shall make available the bids and offers either sequentially or
simultaneously in the Designated Product;
“Market Maker” shall mean a Corporate Broker of the Exchange permitted under these Regulations or a financial
institution which satisfies the eligibility criteria devised by the Exchange with prior approval of the Commission to
function as a Market Maker in terms of Market Making Agreement;
“Market Making Agreement” shall mean an agreement executed between the Market Maker and the Exchange to
perform market making activities under these Regulations;
“Market Makers Inventory” shall mean quantum of Designated Product or its underlying constituent securities that a
Market Maker shall be required to maintain in its market making portfolio to facilitate the market making activities in
the Designated Product;
“Market Making Order/Quote” shall mean a valid order/quote entered by the Market Maker into the automated
trading platform provided by the Exchange for the Designated Product;
“Spread Limit” shall mean the maximum difference between the offer price and the bid price that are quoted by the
Market Maker for each Designated Product as prescribed under these Regulations. Provided that the bid or offer
price shall not exceed the applicable circuit breaker limits for the Designated Product.
12.2. SELECTION OF DESIGNATED PRODUCTS FOR MARKET MAKING:
12.2.1. The Exchange shall formulate the eligibility criteria for selection of Designated Products eligible for market making from
time to time with prior approval of the Commission.
Provided that all ETFs shall be classified as Designated Products eligible for market making and shall not be subject to
the eligibility criteria formulated by the Exchange under this Regulation. The AP for the ETF shall act as one of the
Market Makers for that ETF under these Regulations.
12.2.2. Such eligibility criteria shall, inter-alia, include that securities having any of following characteristics in the respective
markets during the review period shall not be eligible for market making:
Securities that have been traded more than 50% of the trading days during the review period;
Securities with average daily value of trades exceeding Rs. 5,000,000/-;
Securities where the company is on Defaulters Segment in the process of de-listing and/or whose trading is
suspended, declared non-tradable and with net worth erosion above 50%; or
(d) Securities with impact cost less than one in respective market.
(a)
(b)
(c)
12.2.3. The Exchange shall carry out a review of the list of eligible securities for market making annually based on data of last
six months under intimation to the Commission.
12.2.4. The Exchange shall give at least 30 days prior notice to the market participants before including or excluding any
security from the list of eligible securities for market making.
12.2.5. The Exchange shall disseminate the list of eligible securities for market making in September every year on the basis of
data available for the preceding six months. Securities excluded from the said list, shall not be eligible for market making
as Designated Product for next tenure of market making.
12.3. APPOINTMENT OF MARKET MAKER AND ANCILLARY MATTERS:
12.3.1. A person shall be eligible to be appointed as a Market Maker if such person:
(a)
is:
(i)
(ii)
(b)
a Corporate Brokerage House; or
a financial institution which satisfies the eligibility criteria devised by the Exchange with prior approval of the
Commission. In such case, the application shall be accompanied with prior written consent from Designated
Broker.
has a minimum equity (net of provisions and capitalized losses if any) of Rs.100 million as per latest audited
financial statements as a measure of financial stability;
12.3.2. The Exchange shall invite applications from the eligible persons (hereinafter referred to as the “Applicant”) referred under
12.3.1. above who are desirous to act as Market Makers for any Designated Product. Provided that in the case of the
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ETF, the Applicant may apply for appointment as Market Maker prior to the formal listing of relevant ETF units on the
Exchange.
12.3.3. The applicant shall provide to the Exchange the following along-with the application under 12.3.2. above:
Application for appointment as a Market Maker as per Form-I;
Undertaking to comply with these regulations and to adhere to Market Making Agreement as per Form-II;
The most recent audited annual accounts, quarterly accounts and net capital balance certificate;
Details of all other businesses of the Applicant, if any, e.g. investment banking, financial consultancy service, money
market participation etc.;
(e) Name(s), address(es), qualification(s) and contact detail(s) of Market Maker’s agent(s) and/or trader(s) authorized
for market making activities;
(f) In case of a financial institution, prior written consent obtained from the Designated Broker;
(g) Name(s), address(es), qualification(s) and contact detail(s) of staff of applicant having at least three years of
relevant capital market experience;
(h) List of associates, subsidiaries, holding company etc. with total shareholding mentioned therein; and
(i) A refundable minimum security deposit as prescribed in the Deposit, Fees, Contribution and other Sums Schedule.
(j) In the case of funds that have not yet been listed by the Exchange as ETFs under these Regulations, the applicant
shall provide a Consent Letter to the Exchange from the AMC relating to such fund certifying that such AMC intends
to appoint the Applicant as AP for the ETF.
(a)
(b)
(c)
(d)
12.3.4. The Applicant shall properly disclose his business relationship during the last one year with the company in respect of
whose security he desires to act as a Market Maker especially if the Applicant generates or has generated business from
such company directly or indirectly through investment advisory, underwriting or any other material business transaction.
12.3.5. The Applicant shall be obliged to provide any missing or additional information within such time as may be specified by
the Exchange. In case the Applicant fails to comply with the requirements of these Regulations and/or provide the
required information/documents within the specified time or any extension thereof, his application shall be rejected by the
Exchange.
12.3.6. The Exchange may require the Applicant to demonstrate to the satisfaction of the Exchange that it is suitably qualified to
make a market in the Designated Product(s) in respect of which the application is made. Further, the Exchange may
conduct the on-site inspection to ensure the availability of requisite infrastructure with the Applicant.
12.3.7. At the time of scrutinizing the application, the Exchange shall evaluate the Applicant based on the criteria as specified
from time to time relating to integrity, trading experience, infrastructure, business continuity arrangements, internal
information security procedures, risk management policy/procedures and the suitability of persons to be engaged in
market making activities as agent/trader in each Designated Product.
12.3.8. If the Exchange is satisfied that the Applicant is eligible to carryout market making activities and the requisite documents
including Market Making Agreement have been submitted as required under these Regulations, the Exchange shall
appoint such Applicant as a Market Maker for a period of one year renewable every financial year and communicate the
same in writing to the Market Maker specifying the date and time of commencement of his tenure as a Market Maker.
Provided that in case of an Applicant desirous of acting as a Market Maker for an ETF, the Exchange shall, if satisfied,
appoint such Applicant as Market Maker conditionally for a period of one year and its term shall start from the date of
formal listing of such ETF on the Exchange. If the Market Maker fails to comply with the requirements as prescribed
under these Regulations or the fund is not listed as an ETF at the Exchange, the appointment of the Market Maker shall
be cancelled.
12.3.9. There shall not be more than five Market Makers at any time for any Designated Product, who shall enter into an
agreement with the Exchange for acting as the Market Maker. The agreement shall contain such terms and conditions as
the Exchange may in its absolute discretion consider appropriate.
12.3.10. The Exchange may, from time to time, prescribe or modify the following:
(a) The maximum allowable Designated Product(s) in which a Market Maker may perform market making activities;
(b) The evaluation criteria for evaluation of application for appointment of Market Maker; and
(c) The criteria for evaluation of performance of the Market Maker(s).
12.3.11. A Market Maker may resign after three months of commencement of its term by providing the Exchange at least two
months’ prior written notice along with the reasons for resignation and specifying the effective date of resignation,
provided that a substitute Market Maker in the Designated Product acceptable to the Exchange is ready to take the
outgoing Market Maker’s role and responsibilities for the remaining period of the said term.
Provided that in case of an ETF, the AP shall provide a No Objection Certificate to the Exchange from the AMC
certifying that the AMC has appointed a substitute AP and intends to terminate its APA with the AP which has tendered
its resignation as Market Maker.
12.3.12. In case of renewal of a Market Making Agreement, the Market Maker shall be required to submit request for
reappointment at least two months prior to the expiry of previous appointment and the Exchange shall decide such
renewal request before one month of expiry of its tenure. Alternatively where a Market Maker does not wish to continue
as Market Maker, it shall have to inform the Exchange about its intention before the commencement of last quarter of its
tenure. The market shall be intimated about a new appointee, 30 days prior to its formal functioning as a Market Maker.
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Provided that in case of an ETF, the AP shall be required to comply with the requirements specified in the proviso to
12.3.11. above.
12.3.13. The decision of the Exchange in respect of the acceptance or rejection of application of an Applicant shall be final and
conclusive. The permission by the Exchange to act as Market Maker shall be non-exclusive, non-transferable and
subject to such conditions as may from time to time be prescribed by the Exchange in its absolute discretion.
12.4. MARKET MAKING AGREEMENT:
The activities of a Market Maker shall be governed by these Regulations and Market Making Agreement, which shall,
inter-alia, includes the following:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
Rights and obligations of the Market Maker in the Designated Product;
Duration of the Market Making Agreement and renewals thereof provided that such duration of agreement shall be
at least one year;
Conditions under which Market Making Agreement may be terminated;
Cash and/or agreed Market Making Inventory that the Market Marker shall be obligated to maintain on daily basis
and/or lowest volumes threshold for a day to fulfill Market Making obligation;
Time window during trading hours that the Market Maker shall be obliged to ensure presence on the order book;
The maximum spread between the bid and offer price that Market Maker may maintain for the Designated Product;
Minimum, maximum and normal order size with agreed specifications;
The applicable transaction fees (Laga), inventory holding cost i.e. CDC Custody Fee etc.;
Minimum and Maximum Market Making Inventory size shall be linked with Free-Float/total issue size of Designated
Product which the Market Maker is obliged to maintain at the end of each day; and
Minimum liquidity for each Designated Product.
12.5. CIRCUIT BREAKERS AND MARKET HALTS:
The security-wise circuit breakers imposed by the Exchange from time to time shall also be applicable on Designated
Products.
Further, the Market Maker may not be required to enter two-way quotes where the Designated Product continuously
trades for fifteen minutes within one percent below the applicable circuit breakers. Provided that in case of an ETF, the
AP may only withdraw quotes as per the conditions covered in its APA with the AMC of such ETF.
12.6. MAXIMUM SPREADS:
12.6.1. Market Makers shall be required to enter two-way prices within the applicable circuit breakers and Spread Limits. For
Designated Products, the maximum Spread Limits shall be as under:
Band 1: Liquid Securities: 2% or less of the last executed price. This spread limit shall be applicable to securities
which have average daily turnover of less than 200,000 shares per day or traded between 50% to 40% of the total
traded days during the review period. (This applies to securities which have average daily turnover of less than
200,000 shares/day or traded on less than 75% of the traded days).
(b) Band 2: Less Liquid Securities: 3% or less of the last executed price. This spread limit shall be applicable to
securities which have average daily turnover of less than 100,000 shares per day or traded between 40% to 30% of
the total traded days during the review period. (This applies to Securities which have average daily turnover of less
than 100,000 shares/day, or traded on less than 60% of the traded days)
(c) Band 3: Least Liquid Securities: 5% or less of the last executed price. This spread limit shall be applicable to
securities which have average daily turnover of less than 50,000 shares per day or traded below 30% of the total
traded days during the review period.
(d) In the case of ETFs, the Exchange shall specify the maximum Spread Limits from time to time with the prior
approval of the Commission.
(a)
12.6.2. Where deemed necessary, the Exchange may alter the above Spread Limits from time to time with prior approval of the
Commission.
12.7. MARKET MAKER’S ORDERS/QUOTES:
12.7.1. The minimum size of Market Making Orders/Quotes shall be at least 50 shares or ETF units, whichever is applicable.
12.7.2. It shall be obligatory for a Market Maker to replenish its orders/quotes within 90 seconds following full execution,
withdrawal, expiration or any change in the price of either bid or offer.
12.7.3. The Market Making Orders/Quotes are to be maintained on both sides during Designated Market Making Period as
mentioned in the Market Making Agreement which may be after 15 minutes of the pre-opening session and 30 minutes
before the market’s official closing time.
12.7.4. Market Making Orders/Quotes are to be maintained throughout the Designated Market Making Period, as specified in the
Market Making Agreement.
12.8. FUNCTIONS AND OBLIGATIONS OF MARKET MAKER:
12.8.1. The Market Maker shall, at all times, comply with the applicable regulatory and contractual obligations.
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12.8.2. The Market Maker shall maintain a sufficient inventory for each Designated Product subject to the minimum and
maximum inventory requirements for market making activities. The agreed quantity of the Market Makers’ Inventory shall
be stipulated in Market Making Agreement.
12.8.3. The Market Maker shall be obliged to make available both buy and sell orders/quotes during the Designated Market
Making Period.
12.8.4. The Market Maker shall be allowed Short Selling in all Designated Products, excluding ETFs unless explicitly provided in
these Regulations. However, such Short Sale shall be executed in accordance with the chapter 10 pertaining to Ready
Delivery Contracts of these Regulations.
12.8.5. The Market Maker shall notify all Short Sales executed to the Exchange at the end of the trading day through automated
interface provided by the Exchange. However, the Market Maker shall not be required to declare such orders/quotes
through the special window for Short Sale order while placing such orders/quotes.
12.8.6. Market Maker shall have sufficient pre-existing interest at the end of each Short Sale day to validate that the Market
Maker can deliver the quantity sold short during the day.
12.8.7. The Market Maker shall be obliged to replenish its orders/quotes within 90 seconds subsequent to execution of already
queued orders/quotes, within the Designated Market Making Period.
12.8.8. The Market Maker shall keep its market making activities separate from other trading activities. For this purpose, the
Market Marker shall:
(a)
(b)
(c)
(d)
Register separate UIN and allocate client code(s) for market making activities;
Maintain separate ledger account(s);
Open and maintain separate CDC Account for Market Making Inventory; and
Ensure that any of its authorized agent(s)/trader(s) for market making activities shall not indulge in normal trading
activities during Designated Market Making Period.
12.8.9. The Market Maker must maintain sufficient and appropriate risk management control procedures for its designated
agent(s)/trader(s).
12.8.10. The Market Maker shall be fully responsible for any act or omission or non-compliance of trading rules and/or Market
Making Agreement by its authorized agent(s)/trader(s).
12.8.11. The Market Maker shall pay transaction fees and other levies as specified by the Exchange from time to time. The
Exchange may, subject to satisfactory performance of the Market Maker, allow such Market Maker reasonable
discount(s), partial or complete waiver of transaction fees excluding contributions to the CHPF, IPF and other regulatory
levies and also distribute in full or in part the transaction fees to the respective Market Maker collected from
counterparty involved in trades executed with the former.
Provided that the Market Maker cannot claim waiver, discount(s) in transaction fees or sharing of counterparty
transaction fee as a matter of right.
12.8.12. If the Market Maker fails to fulfill its obligations in accordance with the Market Making Agreement for any specific period,
the Exchange may impose normal transaction fee for all executed trades carried out by the Market Maker during the
period in question or refuse the application of reduced fee facility which may otherwise be available to Market Maker.
12.8.13. The Market Maker shall provide any information/explanation of any actions, as required by the Exchange from time to
time, in relation to its market making activities.
12.8.14. The Market Maker, subject to Market Making Agreement, may request the Exchange for any privileged information
necessary for performance of its market making activities. However, such information shall not contain Broker and client
level information.
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FORM-1
FORM OF APPLICATION
The General Manager
Karachi Stock Exchange Limited
Karachi.
APPLICATION FORM FOR APPOINTMENT AS MARKET MAKER
We hereby apply for Appointment as Market Maker at the Karachi Stock Exchange Limited in accordance with these
regulations. Our brief particulars are as under:
1.
Complete company name (no abbreviations)
2.
Company registration number
3.
Broker registration number and date of expiry of said registration and in case of a Financial Institution, the particulars
of Designated Broker including name, broker registration number and date of expiry of its registration.
4.
Registered office address and contact details, in case the location at which market making activities will be undertaken
is different, please provide complete address and contact details of such location
5.
The name(s) and symbol(s) of the Designated Product(s) for which market making activities will be carried out.
We declare that the information given in this form is true to the best of our knowledge and belief and that if any change occurs in
the information given in this application and the accompanying documents, we shall report the same to the Exchange on the
same day on which the change occurs.
______________________________________
Name and Signature of Authorized Person
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FORM-II
FORM OF UNCONDITIONAL UNDERTAKING
In pursuance to these Regulations, we ___________________________________having our registered office at
________________________________________________________ hereby undertake and bind ourselves as under:
1.
That we undertake to comply the requirements under these Regulations of the Exchange as amended from time to
time; and
2.
That we undertake to adhere to Market Making Agreement with the Karachi Stock Exchange Limited.
Yours faithfully,
________________________________
_______________________
Chief Executive/Authorized person
Common seal of Company
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Chapter 13:
DELIVERABLE FUTURES CONTRACT MARKET REGULATIONS
13.1. DEFINITIONS:
In this chapter, unless the subject or context otherwise requires:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
“Current Contract” shall mean a Deliverable Futures Contract of a security which will be expiring within the current
calendar month.
“Daily Settlement Price” shall mean the Closing Price in the Deliverable Futures Contract Market.
“Deliverable Futures Contract Market” shall mean a market as envisaged under these Regulations.
“Deliverable Futures Contract” shall mean Standardized Stock Futures contract which shall be trading under
Deliverable Futures Contract Market and settled/delivered in accordance with these Regulations as amended from
time to time.
“Final Settlement Price” shall mean the Closing Price of the underlying security in the Ready Market on last trading
day of the Current Contract.
“Next Contract” shall mean a Deliverable Futures Contract which will be expiring within next calendar month.”
“Pre-Existing Interest" shall mean:
There is an earlier purchase on the same Exchange in the same Deliverable Futures Contract or an earlier
Deliverable Futures Contract which will settle prior to the settlement of the sale.
(ii) There is an earlier purchase on the same Exchange in the Ready Delivery Contract Market which will settle
prior to the settlement of the sale.
(iii) The squaring-up of an open position in margin trading market, as a financee on account of same UIN of same
security.
(iv) There is an unencumbered holding available in the CDS account in the investor's own or joint account.
(i)
In this chapter, unless there is anything repugnant in the subject or context, words importing the “masculine gender” shall
include the “feminine gender / corporate entities”.
13.2. CONTRACT SPECIFICATIONS:
13.2.1. The Contract specifications for the Deliverable Futures Contract as determined by the Board and approved by the
Commission and attached to this chapter as Annexure-A shall form part of these Regulations.
13.2.2. Deliverable Futures Contract shall be for the period specified by the Exchange through a Notice but shall not be for a
period less than one calendar month. However, where a corporate announcement is expected in scrip, during a
Deliverable Futures Contract period, the Exchange shall be allowed to open more than one Deliverable Futures Contract
of shortened periods in such scrip, in a month, on cumulative basis and excluding any announcement/entitlement.
Deliverable Futures Contract for different months shall trade simultaneously.
13.2.3. While opening any Deliverable Futures Contract, the Exchange shall notify the name of the company, date of opening,
date of settlement of the said contract and other relevant details.
13.2.4. New Deliverable Futures Contract period shall start at least two days before the close of the old Deliverable Futures
Contract.
13.3. ELIGIBILITY OF SECURITIES:
13.3.1. The securities eligible for trading in the Deliverable Futures Contract Market shall be determined and the Deliverable
Futures Contract shall be implemented by the Exchange every six month in accordance with the requirements prescribed
for final review and notice period under the Uniform Criteria.
13.3.2. The securities selected biannually under 13.3.1. above, shall be reviewed in accordance with the requirements for interim
review as prescribed in Uniform Criteria.
Provided that the above requirement of interim review shall be waived where the implementation date of interim review
coincides with that of final review.
13.4. DELIVERABLE FUTURES CONTRACT TRADING:
13.4.1. Trading in Deliverable Futures Contracts shall be conducted under these Regulations with such modifications, alterations
and additions as may be made from time to time by the Board with prior approval of the Commission.
13.4.2. Trading in Deliverable Futures Contract shall take place through KATS.
13.4.3. When a buyer/seller accepts offer/bid of a Deliverable Futures Contract, the said Contract with the specifications as
mentioned in Annexure I attached hereto shall be deemed to have taken place between the buyer and the seller.
13.4.4. All offers/bids made may be accepted for up to the limit of the offer/bid and the Broker making an offer/bid shall be bound
by the terms of the Deliverable Futures Contract.
13.4.5. All trades in the Deliverable Futures Contract Market shall be conducted by Brokers for and on behalf of their clients or
for their own proprietary position under registered client codes duly mapped with the UIN.
13.4.6. During the overlapping period of Deliverable Futures Contract of two consecutive months, a Broker shall be allowed to
enter into, and buy orders in the Next Contract to the extent of his net-buy proprietary position or on behalf of net-buy
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positions of his clients in the same security in the Current Contract, using a special window designated in the KATS for
switching of net buy position from Current Contract to Next Contract. After execution of an order entered through the said
special window, two opposite Deliverable Futures Contracts shall be generated in the same security with the same
counterparty i.e. one sell Deliverable Futures Contract at the market price prevailing at the time of execution of such
order in the Current Contract and one buy Deliverable Futures Contract at the matched Price on time-price priority
through KATS in the Next Contract.
During the overlapping period normal rollover for selling and buying separately in two different Deliverable Futures
Contracts shall continue as per current practice.
13.5. BLANK SALE AND COMPLIANCE:
13.5.1. A Broker on his proprietary or clients’ accounts on UIN basis shall be allowed to make Blank Sale up to 0.5% of the Free-
Float of a scrip or Rs.50 million, whichever is higher, in the Deliverable Futures Contract Market subject to maximum
blank sale of 3.0% of the Free-Float of a scrip by such Broker for all his accounts including proprietary and clients’
accounts at any given time during a Contract Period.
13.5.2. No Broker on his proprietary or client's account shall make Blank Sale unless the trade is declared as a Blank Sale at the
time of placement of order through KATS in a special blank sale order window designed in the system for the purpose.
13.5.3. No sale position in excess of the threshold permitted as per 13.5.1. above will be allowed in the Deliverable Futures
Contract Market to a Broker (on his proprietary or client’s account on UIN basis) unless there is a Pre-Existing Interest of
the seller.
Note:
Pre-Existing Interest in order to remain qualified for this purpose should continue to exist until the sale position in the
Deliverable Futures Contract Market is squared off or settled at the conclusion of the Deliverable Futures Contract. The
Investor shall ensure that no selling beyond limit specified in 13.5.1. above, is carried-out without Pre-Existing Interest in
the Deliverable Futures Contract Market. In case of non-compliance, the respective Broker shall be penalized under
chapter 20 of these Regulations. However, such amount may be passed on to respective Investor by the Broker provided
that such Investor is maintaining multiple accounts i.e. Sub-Account with another Broker(s) and/or Investor Account with
CDC and Broker exercised due care and diligence before executing such order.
13.6. DEPOSITS AND MARGINS:
13.6.1. Any Broker may enter into Deliverable Futures Contracts under these Regulations if he notifies in writing to the Exchange
his desire for trading in the Deliverable Futures Contract Market and pay basic deposit as required under Deposits, Fee,
Contribution and other Sums Schedule.
13.6.2. Each Broker entering into Deliverable Futures Contract shall pay Mark-to-Market Losses in accordance with chapter 19
of the KSE Regulations subject to basic exemption of Rs.100,000/- in respect of payment of Mark-to-Market Losses.
13.6.3. The scrip-wise outstanding positions of Brokers’ proprietary account and his client(s) accounts will be revalued at
relevant Daily Settlement Price and shall be transferred to the next trading day. The system shall consider such revalued
amounts as the traded values, based on which Exposures will be calculated.
13.6.4. In case of failure of any Broker to deposit Exposure Margins/MtM Losses, he will not be allowed to take any fresh
position. However, the said Broker will be allowed to reduce his positions as prescribed under the chapter 19 of the KSE
Regulations.
13.6.5. In case a Broker delays any payment to the Exchange and/or Clearing Company for meeting any of his obligations in the
Deliverable Futures Contract Market beyond the specified time thrice in a calendar year, he would be liable to deposit
Rs.1,000,000/- with the Exchange for a period of 3 months. In case delay in payment has occurred for fourth time in a
calendar year, the deposit amount would be enhanced to Rs. 2,000,000/- to be held by the Exchange for a period of 6
months.
Provided that the deposit amount shall not be utilized against the Exposure Margins of such Broker.
13.7. CLEARING AND SETTLEMENT:
13.7.1. The Clearing House/Clearing Company shall receive payments from Brokers on settlement days within the time specified
as per the KSE Regulations and NCCPL Regulations. In case any Broker fails to make any payment to the Clearing
House/Clearing Company within the specified time, default proceedings shall be initiated against that Broker under
relevant KSE Regulations and the regulations of the Clearing Company.
13.7.2. In the event of declaration of dividend, bonus, right and privileges pertaining to securities being traded in the Deliverable
Futures Contract Market for which the share transfer books of the company are to be closed during the pendency of the
settlement, the Exchange shall predate the last day of business and the settlement date of that particular security before
the book closure date.
13.7.3. DAILY CLEARING:
(a)
There shall be Daily Clearing at the Daily Settlement Price and MtM amounts (after adjustments of MtM Losses)
received during the day in cash, in respect of a Broker’s proprietary or client account in a particular scrip, shall be
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collected from Brokers in cash on T+0 settlement basis (by day-end on trade day) through Clearing House or
Clearing Company.
(b)
The Exchange shall withhold MtM Profits, if any, (after adjustment of MtM Losses) of a Broker on his proprietary or
client account on UIN basis, in particular scrip until its Final Settlement.
However, MtM Profit, if any, of a Broker on his proprietary or client account in a particular security shall be adjusted
against the MtM Loss in the same security of such Broker’s proprietary or client account on UIN basis.
13.7.4. FINAL CLEARING AND SETTLEMENT:
(a)
There shall be Final Clearing on last day of Contract Period at Final Settlement Price of that day on T+2 settlement
basis through the Clearing House/Clearing Company. However, MtM Losses shall continue to be collected on daily
basis, based on Closing Price of the security for the purpose of risk management in the Ready Delivery Contract
Market, till the time, the net positions are settled.
(b)
MtM Profits withheld by the Exchange will be paid to the respective Brokers on the T+2 settlement basis through
Clearing Company.
13.7.5. SPECIAL CLEARING:
Where the Exchange determines that circumstances warrant in the best interest of the Market and Market Participants
that suspension of the scrip(s) is necessary, the Exchange may announce a special clearing in the particular Deliverable
Futures Contract.
In case special clearing is announced, trading in particular security(ies) shall be suspended until such time the MtM
Losses are settled in cash and the market shall open after all MtM Losses have been settled in the suspended
security(ies).
13.8. SUSPENSION OR DISCONTINUATION OF DELIVERABLE FUTURES CONTRACT MARKET:
13.8.1. The Board may at any time, with the prior written approval of the Commission and on such conditions and manner if any
as the Commission may specify, permanently discontinue the Deliverable Futures Contract Market, or temporarily
suspend the operation of the said market for a specified period of time.
13.8.2. The Board shall, if instructed by the Commission to do so and on such conditions and manner as the Commission may
specify, permanently discontinue the Deliverable Futures Contract Market or temporarily suspend the operation of the
said market for a specified period of time.
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Annexure-A
CONTRACT SPECIFICATIONS OF DELIVERABLE FUTURES CONTRACT
Contract Size
Position Limits
Daily Price Limits
Contract Period
Opening of Contract
Overlapping Period
Expiration Date/ Last
trading day
Settlement
Depository of underlying
security
500 Shares
As prescribed under chapter 19 of these Regulations pertaining to Risk Management, as
amended from time to time.
As provided under chapter 19 of these Regulations pertaining to Risk Management, as
amended from time to time.
1 calendar month
Monday, preceding the last Friday of the month, if Monday is not a trading day, then
immediate next trading day.
Maximum Five Days (not less than two days).
Last Friday of the calendar month, if last Friday is not a trading day, then immediate preceding
trading day.
T+2 settlements falling immediately after the close of contract.
Central Depository Company of Pakistan Limited
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Chapter 14:
CASH-SETTLED FUTURES CONTRACT MARKET REGULATIONS
14.1. DEFINITIONS:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
“Contract Multiplier” shall mean, the number of underlying shares in the CSF Contract, in the manner prescribed in
Annexure-A to this chapter. The CSF contract multiplier is subject to change when adjustments are made with
respect to corporate actions;
“CSF Contract” shall mean, Standardized Cash-Settled Stock Futures Contract;
“CSF Market” shall mean the market where Cash Settled Futures Contracts are traded;
“Daily Settlement Price” shall mean the Closing Price in the Cash-Settled Futures Contract Market;
“Final Settlement Price of a scrip” shall mean, The average bid/ask quote of the scrip in the Ready Delivery Contract
Market which would be calculated as a ratio of A/B where “A” equals the sum of market bid and ask prices taking the
best bid and best ask price of the scrip during each one minute interval for last two hour trading on the last trading
day of the Contract or where no trading takes place on that day, the immediate preceding trading day. “B” equals the
total number of bid and ask prices sampled i.e. 240. The final settlement price thus arrived at shall be rounded to the
nearest paisa per unit or other such amount per unit determined by the Exchange;
“Open Interest in a Scrip” shall mean the total number of Contracts, of a Broker and his clients, of a scrip that have
not been offset and closed at any point in time by an opposite transaction. For calculation of open interest only one
side of the Contracts is counted;
“Open Position in a Scrip” shall mean the sum of long and short positions of a Broker and his clients at any point in
time in a Contract for that scrip.
14.2. TRADING:
14.2.1. Trading in CSF Contracts shall take place through KATS.
14.2.2. Any Broker may enter into CSF Contracts under this chapter subject to prior notification in writing to the Exchange and
payment of basic deposit as mentioned in Deposits, Fee, Contribution and other Sums Schedule.
14.2.3. ELIGIBILITY OF SECURITIES:
The securities eligible for trading in the CSF Market shall be determined and implemented by the Exchange every
six month in accordance with the requirements prescribed for final review and notice period under the Uniform
Criteria.
(b) The securities selected biannually under 14.2.3.(a). shall be reviewed in accordance with the requirements for
interim review as prescribed in Uniform Criteria.
(a)
Provided that the above requirement of interim review shall be waived where the implementation date of interim review
coincides with that of final review.
14.2.4. The Contract specifications for the CSF Contract as determined by the Board and approved by the Commission and
attached hereto as Annexure-A, shall form part of these Regulations.
14.2.5. When a buyer/seller accepts a bid/offer of a CSF Contract, the said Contract with the specifications as mentioned in
Annexure-A attached hereto this chapter shall be deemed to have been taken place between the buyer and the seller.
14.2.6. All offers/bids made may be accepted for or up to the limit of the offer/bid and the Broker making an offer/bid shall be
bound by terms of the CSF Contract.
14.2.7. Upon opening of any CSF Contract, the Exchange shall notify the name of the company, dates of opening, closing and
settlement of the said Contract and other relevant details as mentioned in Annexure-A to this chapter.
14.2.8. There shall be one standardized 90 days CSF Contract which shall be issued each month on the first trading day
following last Friday of each month for each eligible security. However, the Exchange shall also have discretionary
powers to introduce a contract of 30 and/or 7 days. The 30 and 90 days contracts shall expire on the last Friday of the
respective month of the Contract whereas the 7 days contracts shall start on each Monday or first trading day of the
week and shall expire on each Friday (or last working day of the week). No overlapping period is allowed in the CSF
Contracts.
The CSF Contracts shall be identified by the trading symbols of the underlying eligible securities under the respective
CSF Contracts and such trading symbols shall be decided by the Exchange.
14.2.9. The expiration date/last trading day shall be the last Friday of the respective calendar month in which the 30 or 90 days
CSF Contract shall expire and/or each Friday of the week in case of 7 days Contract. If the relevant Friday is a trading
holiday, then the respective CSF Contract shall expire on the preceding trading day.
14.2.10. In a 90 days CSF Contract, the CSF Contract Multiplier will be adjusted for corporate actions like bonus issue or right
issue in the underlying scrip. The adjustment will take effect from the day on which trading in Ready Delivery Contract
Market commences on ex-entitlement basis. For example; when the CSF Contract Multiplier is 500 and there is a 1-for-2
bonus share issue (i.e. for every 2 existing shares, the holder gets one additional share), the CSF Contract Multiplier will
be adjusted to 750 (500 x 3/2). When the Contract Multiplier is adjusted, the price of each share in the Contract will
correspondingly be adjusted by the Exchange. In the above example, in case of bonus issue, the price of each share in
the Contract will be adjusted to 2/3 of its Closing Price of the trading day which is just preceding to the day on which
trading in Ready Delivery Contract Market commences on ex-entitlement basis. For instance, if the price was Rs 150 it
would be Rs 100 (150 x 2/3). Similarly, when there is a 1-for-2 right issue, the CSF Contract Multiplier will be adjusted to
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750 (500 x 3/2) on the ex-right date. When the CSF Contract Multiplier is adjusted, the CSF Contract price ruling on the
ex-right date will correspondingly be increased by the exercise price per share multiplied by 250. The adjusted price per
share of the CSF Contract would increase, decrease or remain same, depending upon whether the right shares have
been offered at a premium, discount or par respectively, to its Closing Price of the trading day which is just preceding to
the day on which trading in Ready Delivery Contract Market commences on ex-right basis. The adjustment of CSF
Contract Multiplier shall be applicable only to the CSF Contracts that are trading as of the corporate action date. When
the next new Contract is traded its CSF Contract Multiplier shall be reinstated to the original lot size determined by the
Board. (No mark to market differences by virtue of such adjustments shall be payable or receivable on the ex-entitlement
date).
Provided that in case of 30 days CSF Contracts, in the event of declaration of bonus and/or right and/or cash dividend
after commencement of Contract pertaining to a security being traded in the CSF Market for which the share transfer
books of the company are to be closed during the pendency of the settlement, the Exchange shall predate the last day of
trading and the settlement date of that particular security’s Contract before the book closure date.
Provided further that in 30 and/or 7 days CSF Contracts where a company announces book closure for any one or more
of the above mentioned entitlements before opening of the respective Contract and its book closure falls within the
Contract Period, the corresponding 30 and/or 7 days Contracts shall be opened on the first trading day of that
month/week on an ex-entitlement basis.
14.2.11. In case where the cash dividend is declared in a scrip, no adjustment would be made by the Exchange in the 90 days
CSF Contracts.
14.3. CLEARING AND SETTLEMENT:
14.3.1. The Clearing House/ Clearing Company shall receive payments from Brokers on settlement days within the time
specified by the Exchange/ Clearing Company. In case any Broker fails to make any payment to the Clearing House /
Clearing Company within the specified time, default proceedings shall be initiated against that Broker under relevant KSE
Regulations and NCCPL Regulations.
14.3.2. DAILY CLEARING AND SETTLEMENT:
There shall be Daily Clearing at the Daily Settlement Price of the day and MtM Losses/Profits shall be settled in the
following manner:
Net MtM Losses shall be collected from Brokers in cash on T+0 settlement basis (by day-end on trade day) through
Clearing House or Clearing Company.
(b) No net MtM Profits shall be disbursed to Brokers in cash on T+1 settlement basis through Clearing House / Clearing
Company.
(c) Scrip-wise outstanding position of Brokers will be revalued at relevant Daily Settlement Price. The system will
consider such revalued amounts as traded values for collection of MtM Losses and for making payment of MtM
Profits.
(a)
14.3.3. FINAL CLEARING AND SETTLEMENT:
Upon closing of the CSF Contract, final settlement shall take place on T+1 basis and the resulting profits or losses,
calculated on the basis of “Final Settlement Price” shall be settled in cash. The payment and collection of profits or
losses on final settlement to/from Brokers shall be carried out by the Clearing Company within the stipulated time and in
the prescribed manner.
14.3.4. SPECIAL CLEARING AND SETTLEMENT:
The Exchange may announce a special clearing in a CSF Contract or all CSF Contracts or in a particular scrip or all
scrips in a CSF Contract or all CSF Contracts, subject to the prior approval of the Commission, in an emergency situation
which may include but is not limited to abnormal country wide riot or strike, fire, accident at the Exchange, change of
government or act of God or for any other catastrophic event. In case a special clearing is announced, trading shall be
suspended and all Open Interests will be required to be settled within one day of the suspension or prior to the opening
of the market. The market would remain suspended till further notice from the Exchange. On resumption of the market,
three new Contracts would open from the date of resumption in place of the three suspended Contracts, expiring on the
original expiry date as per these Regulations. Similarly if Commission considers that the market is overheated or such
indicators exist and the Commission feels it expedient in the investors’ interest to call for special clearing then it may
direct the Exchange to cause a special clearing as detailed above.
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Annexure-A
CONTRACT SPECIFICATION FOR CASH-SETTLED STOCK FUTURES CONTRACT
CSF Contract Multiplier
Position Limits
Daily Price Limits
Period of Contract
Opening of Contract
Overlapping Period
Expiration Date /
Last Trading day
Final Settlement
Final Settlement Price
Daily Settlement Price
Margin Requirements
500 shares, subjected to changes when adjustments are made in respect to corporate actions.
CSF Contract value = Futures price x CSF Contract Multiplier
As prescribed under the chapter 19 of these Regulations, as amended from time to time.
As provided under chapter 19 of these Regulations as amended from time to time.
90, 30 or 7 days
First Trading day of the next week following the close of the contract.
None
Last Friday of the calendar month/week, if last Friday is not a trading day, then immediate
preceding trading day.
Cash settlement on T+1 basis.
As defined in these Regulations.
As defined in these Regulations.
As per the VaR based system prescribed under the chapter 19 of these Regulations.
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Chapter 15:
INDEX OPTION CONTRACTS MARKET REGULATIONS
15.1. DEFINITIONS:
In this chapter, unless the subject or context otherwise requires:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t)
(u)
(v)
(w)
15.2.
“At the money” shall mean when the Exercise Price of the Option Contract is at the same level as the Exercise
Settlement Index Level. All At the money Option Contracts shall, for the purpose of exercise be considered the same
as Out of the money Option Contracts and expire without getting exercised at the end of the Option Contract;
“Call Option” shall mean, the Option Contract which gives the buyer/holder a right to buy the Underlying Index at the
Exercise Price at the end of a specified period as per the terms of these Regulations;
“Contract Multiplier” shall mean, the numeric value of Rs. 5.00 or any other amount as may be prescribed by the
Exchange from time to time with the prior approval of the Commission;
“Contract Value” shall mean, the value of Option Contract arrived at by multiplying the Exercise Price with the
Contract Multiplier;
“Daily Settlement Price” shall mean, the Weighted Average of the index levels of the Underlying Index during the last
hour of trading, multiplied by the Contract Multiplier and expressed in Pakistani Rupees;
“European Style Option Contract” shall mean, an Option Contract, which shall only be exercised on the Expiration
Day;
“Exercise Price Interval” shall mean, the gap to be maintained between any two successive Exercise Prices as
specified in the contract specifications of each Option Contract which the Exchange may prescribe with the approval
of the Commission from time to time;
“Exercise Price” shall mean, a fixed index level of the Underlying Index which the buyer/holder of Option Contract
can buy (in case of Call Option), or sell (in case of Put Option) as per these Regulations;
“Exercise Settlement Index Level” shall mean, the index level calculated based on a set of 121 readings of 15
second intervals (price points) of the underlying index levels taken between the last half an hour of trading. The
highest and lowest 20 price points will be ignored and the closing price computed as an average of the remaining 81
price points will be the Exercise Settlement Price for the settlement of the Option Contract;
“Exercise Settlement Value” shall mean, the difference between the Contract Value and the Exercise Settlement
Index Level multiplied by the Contract Multiplier and its absolute value expressed in Pakistani Rupees on the
Expiration Day;
“Expiration Day” shall mean the day on which the final settlement obligations are determined in the Option Contract;
“In the money” in case of Call Option shall mean, when the Exercise Price of the Option Contract is less than the
Exercise Settlement Index Level and in case of Put Option shall mean, when the Exercise Price of the Option
Contract is greater than the Exercise Settlement Index Level. All in the money Option Contracts shall be
automatically exercised at the end of the Option Contract;
“Index Options Market” shall mean, a Market made available by the Exchange for trading in Option Contracts subject
to these Regulations;
“Open Interest” shall mean the total value and number of Option Contracts of a broker and his clients in a particular
Underlying Index which have not been subject of offsetting transactions nor reached Expiration Day. For calculation
of open interest only one side of the Option Contract is counted;
“Option Contract” shall mean, a standardized Option Contract which gives the buyer/holder of the Option Contract
the right (but not the obligation) to buy and/or sell the Underlying Index at the Exercise Price at the end of the Option
Contract. The Option Contract shall be subject to these Regulations and as per the contract specifications provided
in Annexure-A;
“Option Seller” shall mean a buyer/holder who squares off an earlier open purchase position in an option contract by
selling an option contract in the same Option Series and Option Type;
“Option Series” shall mean, all Option Contracts of a particular Underlying Index having same Exercise Price and
Expiration Day;
“Option Type” shall mean the classification of an option as either a Put or a Call;
“Option Writer” shall mean a broker or any other institution permitted by the Exchange to write Option Contracts
based on the eligibility criteria devised by the Exchange with prior approval of the Commission;
“Out of the Money” shall mean in case of Call Option, when Exercise Price of the Option Contract is greater than the
Exercise Settlement Index Level and in case of Put Option, when Exercise Price of the Option Contract is less than
Exercise Settlement Index Level. All Out of the money Option Contracts shall expire without getting exercised at the
end of the Option Contracts;
“Premium” shall mean the price obtained by the product of index points and the Contract Multiplier which the buyer
of the Option Contract pays to the Option Writer and/or Seller of the Option Contract for the rights conveyed by the
Option Contract. Premium shall be quoted in index points;
“Put Option” shall mean the Option Contract which gives the buyer/holder a right to sell the Underlying Index at an
Exercise Price at the end of a specified period as per the terms of these Regulations;
“Underlying Index” shall mean the Index as may be defined by the Board for the purpose of trading in Index Options
Market based on the criteria devised by the Exchange with prior approval of the Commission.
TRADING:
15.2.1. Trading in Option Contracts shall take place only through KATS.
15.2.2. Any Broker may enter into Option Contracts under these Regulations subject to prior notification in writing and payment
of basic deposit of the requisite amount in accordance with Deposits, Fees, Contributions and other Sums Schedule .
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This deposit along with any return earned on it is to be kept separate by the Exchange and cannot be used for purposes
other than to meet any obligations of the Broker to the Exchange arising from the Index Options Market.
Provided that only a Broker who meets the eligibility criteria, as prescribed by the Exchange with prior approval of the
Commission, may write Option Contract either for his proprietary position or on behalf of its institutional clients which
also meet the eligibility criteria mentioned above.
Provided further that in case of Broker’s default, this deposit shall be utilized in accordance with the chapter 21 of the
KSE Regulations.
15.2.3. All Option Contracts shall be on the format attached as Annexure-A with this chapter.
15.2.4. The Option Contract as specified in these Regulations shall be deemed to have been executed into when a buyer/seller
accepts a bid/offer in the Index Options Market.
15.2.5. All offers/bids made may be accepted for or up to the limit of the offer/bid as prescribed by the Exchange from time to
time and the Broker making an offer/bid shall be bound by the terms of the Option Contract.
15.2.6. Upon opening of any Option Contract, the Exchange shall notify the name of the Option Contract, the date of opening
and closing of such Option Contract, the date of settlement and other relevant details governing such Option Contract
as mentioned in Annexure-A to this chapter.
15.2.7. There shall be a minimum of fourteen standardized 90 days Option Contracts which shall be issued each month on the
first trading day following last Friday of each month for each Underlying Index. The Exchange shall ensure that three In
the Money, three Out of the Money and one At the Money Option Contracts in each Option Type shall remain available
for trading at all times.
15.2.8. The Expiration Day for the 90 days Option Contracts shall be the last Friday of the third month of the Option Contract. If
the last Friday is a trading holiday the Option Contract shall expire on the preceding trading day. No overlapping period
shall be allowed in Options Contracts.
15.2.9. The Exchange shall issue Option Contracts of same Expiration Day at new Exercise Prices on real-time basis using 50
points Exercise Price Interval based on the level of the Underlying Index.
15.2.10. Trading shall be permitted only in available Option Series and opening of new Option Series shall not affect other
Option Series opened previously.
15.2.11. Only an eligible Option Writer shall be allowed to write an Option Contract without any open purchase position in such
Option Series. Provided that a buyer/holder of an Option Contract may sell an option contract in the same Option Series
only to the extent of squaring up an earlier open purchase position in the same Option Series.
15.2.12. There will be no adjustment for cash Dividends, Bonus and Right issue in the Option Contracts.
15.2.13. The Exchange shall place on its website necessary and relevant information with respect to Open Interest and other
ancillary trading information on daily basis along with any other report that the Exchange and/or the Commission
intends to make available to the public.
15.3.
CLEARING, SETTLEMENT AND RISK MANAGEMENT:
15.3.1. The Option Writer would be subject to all applicable margins and MtM Losses as prescribed in the chapter 19 of the
KSE Regulations, as amended from time to time.
15.3.2. No margins shall be applicable on the buyer of the Option Contract other than pre-trade and VaR margins on exposure,
calculated in accordance with chapter 19 of the KSE Regulations, which shall be levied on real-time basis, till the
completion of pay-in towards Premium settlement.
15.3.3. The Premium shall be payable by buyer/holder of the Option Contract in cash on T+0 bases and distributed onwards by
the Exchange to the Option Writer and/or Option Seller on a T+1 basis.
15.3.4. MtM losses determined by the Exchange at the end of a trading day based on the Daily Settlement Price shall be
collected only from the Option Writer as per chapter 19 of these Regulations, by the Clearing Company on T+0
settlement basis (by day-end on trade day).
15.3.5. The Exchange shall withhold MtM profits, if any, of a Broker on his proprietary or clients’ account in an Option Contract
until the settlement of such Option Contract.
15.3.6. Exercise Settlement shall take place on the next trading day after expiry of the Options Contract and the resulting profits
or losses, calculated on the basis of Exercise Settlement Index Level shall be settled in cash. The collection and
payment of profits or losses on Exercise Settlement to/from Brokers shall be done by the Clearing Company within the
stipulated time and in the prescribed manner as per NCCPL Regulations.
15.3.7. For the purpose of calculating the position limits in the Index Options Market, the Open Interest in all Option Contracts
of a particular Underlying Index on UIN basis would be taken into account.
15.3.8. For the purpose of determining Broker-level and client level Open Interest for calculation of Position Limits, no netting
shall be allowed across offsetting position in Option Contracts of a particular Underlying Index having different
Expiration Day.
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Annexure-A
CONTRACT SPECIFICATION FOR INDEX OPTION CONTRACTS
Contract/Index Multiplier
Rs.5.00 per index point or any other amount as may be determined by the Exchange from time
to time with the prior approval of the Commission.
Contract Description
European Style, Index Calls and Puts
Minimum Fluctuation
(Tick Size)
Exercise Style
Currency
Exercise Price Interval
Period of Contract
Opening of Contract
Expiration Day/
Last Trading day
Trading Hours
Margin Requirements
One Index Point
European
Pakistan Rupee
50 Index Points (3-1-3) (3 OTM, 1 ATM, 3 ITM)
90 days
First trading day of the next week following the close of the Option Contract.
Last Friday of the calendar month in which the Option Contract is to expire.
As may be notified by the Exchange from time to time.
Exposure Margin shall be in accordance with Underlying Index VaR as provided in the chapter
19 of the KSE Regulations governing Risk management, as amended from time to time.
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Chapter 16:
EXCHANGE TRADED FUNDS (ETFs) REGULATIONS
16.1. DEFINITIONS:
In this chapter, the following expressions shall, unless the context requires otherwise, have the meanings herein
specified below:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
“Asset Management Services” shall have the same meaning as ascribed thereto under the Non-Banking Finance
Companies (Establishment and Regulation) Rules, 2003;
“Assets” shall have the same meaning as ascribed thereto under the Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003;
“Benchmark Index” shall mean an Index approved by the Commission, is specified in the Constitutive Documents of
the ETF (the “Constitutive Documents”) and against which the performance of ETF is measured;
“Cash Component” shall mean the difference between the applicable Net Asset Value (NAV) of a creation unit and
the market value of the Portfolio Deposit. The Cash Component will represent accrued dividend, accrued annual
charges including management fees and residual cash in the scheme;
“Cash Payment” shall mean the amount equivalent to the cash component multiplied by the number of creation or
redemption units; if the cash payment is positive, it shall mean the AP should pay the amount to the AMC when
creating ETF units in-kind or the AMC should pay the amount to the AP when the AP redeems ETF units in-kind; if
the cash payment is negative, it shall mean the AMC should pay the amount to the AP when the AP creates ETF
units in-kind or the AP pays the amount to AMC when it redeems ETF units in-kind;
“Constitutive Documents” shall have the same meaning as ascribed thereto under the Circular issued by the
Commission on ETFs;
“Creation Unit” shall mean the specified number of ETF units for issuance and redemption as determined by the
AMC and disclosed in the Constitutive Documents;
“Fund” for the purpose of this chapter shall mean an index tracking open end fund structured as a collective
investment scheme;
“INAV” shall mean Intra-day Net Asset Value calculated on a current basis (with regular intervals) after incorporating
the price change of underlying securities throughout a business day. INAV is indicative current basis Net Asset
Value of an ETF unit that facilitates trading of ETF in the secondary market;
“In-kind Creation” shall mean a portfolio of securities and the cash component to be delivered by an AP to the AMC
either on its own account or on behalf of its clients for Creation of ETF Units;
“In-Kind Redemption” shall mean ETF units being delivered to the AMC by an AP for his own account or on behalf of
his clients in exchange for a portfolio of securities and cash component that forms a creation unit or its integer
multiples as specified in the Portfolio Deposit by the AMC;
“Portfolio Deposit” shall mean a pre-defined basket of securities that represents the benchmark index together with a
cash payment (if applicable) for the purposes of issuance and redemption of creation units and will be announced by
the AMC and composition of the Portfolio Deposit may change from time to time;
“Tracking Error” shall mean the difference between daily returns of an ETF and that of the underlying Benchmark
Index for any given period;
“Trust” shall mean a trust established by a deed under the provisions of the Trusts Act, 1882 (II of 1882);
“Trustee” shall have the same meaning as ascribed thereto under the Non-Banking Finance Companies
(Establishment and Regulation) Rules, 2003;
Words and expressions used but not defined in this chapter shall have the same meaning as assigned to them in the
Securities and Exchange Ordinance, 1969 (XVII of 1969), Non-Banking Finance Companies (Establishment and
Regulation) Rules, 2003, Non-Banking Finance Companies and Notified Entities Regulations, 2008, the circular issued
by the Commission on ETFs and these Regulations.
16.2. LISTING PROCEDURE:
16.2.1. An application for listing of a Fund as an ETF by the AMC shall be accompanied with the documents as required by the
Exchange under Annexure-I attached hereto.
16.2.2. The Exchange shall grant permission for listing of an ETF upon fulfillment of the requirements set forth in the Non-
Banking Finance Companies (Establishment and Regulation) Rules, 2003, Non-Banking Finance Companies and
Notified Entities Regulations, 2008, circulars issued by the Commission on ETFs and these KSE Regulations.
16.2.3. An AMC managing an ETF shall furnish timely disclosure of all relevant information concerning itself, such ETF and the
Trustee.
16.2.4. The Exchange shall ensure that:
No false statements are made in the application submitted for listing of an ETF, documents attached thereto, and
offering document submitted to the Exchange;
(b) The units of the Fund for which the listing application is being made as an ETF are handled in the book-entry
transfer operation by a designated Central Depository or are expected to be handled in such operation by the time of
its listing as an ETF;
(c) The listing is not prejudicial to the interest of the public or the Investors.
(a)
16.3.
TRADING, CLEARING AND SETTLEMENT OF ETF UNITS:
Page 135 of 192
Karachi Stock Exchange Regulations
16.3.1. Trading in ETF units shall be conducted under the KSE Regulations as amended from time to time.
16.3.2. The ETF units listed under these Regulations shall be traded in the Ready Delivery Contract Market through KATS and
buyers and sellers may trade in ETF units in allowable lot size in the manner prescribed for Listed Securities through
Brokers of the Exchange.
16.3.3. Circuit Breakers, netting, Exposure, MtM Losses and other margin requirements on ETF units shall be applicable as
provided for under chapter 19 of these Regulations.
16.3.4. The settlement mechanism of ETF units shall be the same as applicable for the Listed Securities traded in Ready
Delivery Contract Market.
16.4. DISCLOSURE OF INFORMATION:
16.4.1. An AMC managing an ETF shall disclose the matters relating to such ETF as specified below, prior to the opening of
Exchange on a business day:
(a) Complete details regarding the Portfolio Deposit;
(b) The number of ETF units, total net asset value and net asset value per unit;
(c) The Tracking Error.
16.4.2. An AMC managing an ETF shall disclose the following details immediately on its website and to the Exchange:
(a) Revision of a Trust Deed or any similar written document, or cancellation of an investment trust agreement or trust
agreement;
Application pertaining to delisting of ETF;
Merger of such AMC;
Petition for commencement of bankruptcy proceedings of such AMC;
Dissolution of such AMC;
Discontinuation of any business of such AMC;
De-merger of such AMC;
Transfer of the whole business of such AMC to any other entity;
Change in statutory auditors;
Temporary suspension of any additional Trusts managed by the AMC;
Creation, redemption, sale or purchase of ETF units;
The decision to discontinue handling of ETF units in book-entry form in a Central Depository;
When the license, permit or registration necessary for the AMC to conduct business expires, or is cancelled/
changed by the Commission and AMC accordingly decides not to carry out any business;
(n) When the license agreement from the index provider is terminated or the index is discontinued;
(o) Any material facts relating to the ETF or the operation, business, or Assets of the AMC which may have a significant
effect on the investment decisions of investors.
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
16.5. OBLIGATIONS OF AP:
16.5.1. The AP shall fully comply with the requirements of the APA and the market making agreement with the Exchange, and
shall provide an undertaking to the Exchange and the AMC of such compliance.
16.5.2. The Exchange shall ensure that the AP observes high standards of integrity in his dealings in ETF, at the Exchange.
16.6. APPLICABILITY OF LISTING REGULATIONS AND OTHER ALLIED MATTERS:
All provisions of chapter 5 of these KSE Regulations presently in force or as amended from time to time shall be
applicable on the AMC managing an ETF, unless otherwise provided in this chapter.
16.7. LISTING AND ANNUAL FEE:
An AMC that makes an application for the listing of a Fund as an ETF shall pay to the Exchange a listing fee, at the rate of
one twentieth of one percent of the total size of the ETF, subject to a maximum fee of rupees five hundred thousand.
An AMC managing an ETF shall pay an annual listing fee to the Exchange, in respect of each financial year of the
Exchange commencing from 1st July and ending on 30th June, it shall be payable on or before the 30th September in
each calendar year, as per following schedule:
SIZE OF FUND
Up to Rs. 50 million
Above Rs. 50 million
& up to Rs. 500 million
Above Rs. 500 million
RATE OF FEE PER ANNUM
Rs.30,000
Rs.40,000
Rs.50,000
Provided the Board may revise the above fees or any of the slabs or add new slabs with approval of the Commission.
Provided further that an AMC applying for listing of a Fund as an ETF, shall pay annual listing fee for the entire financial
year of the Exchange along with the listing application, irrespective of the date of its listing during the financial year.
An AMC applying for enlistment of a Fund as an ETF on the Exchange shall, in addition to other fees, pay to the
Exchange a sum of Rs.25,000 as non-refundable service charges.
Page 136 of 192
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Annexure-A
MINIMUM CONTENTS TO BE COVERED IN AUTHORIZED PARTICIPANT (AP) AGREEMENT
AP agrees to act as a market maker of the Fund (the ETF) and the Asset Management Company (AMC) authorizes AP to
create and redeem units of the fund in Creation Unit size or multiple thereof.
Both parties mutually agree to clauses relating to the following areas:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
Adherence to Constitutive Documents, applicable Rules, Regulations, Laws and other procedures devised by AMC from
time to time;
Relationship and Role of each party to the agreement;
Procedure for Creation and Redemption of units;
Procedure for settlement of Cash Component;
Conditions where Bids and Offers can be withdrawn by AP (such as at upper & lower caps);
Fees (if any), and disclosure on charging of fee;
Notification to AP by AMC for changes in index weights and composition;
Indemnification from AP to AMC (to cover AMC for areas where AMC cannot regulate the AP);
Availability of Information;
Standard format of notices and procedure to be exchanged between the parties;
Procedure for making amendments to the Agreement;
Effectiveness, Termination of Agreement and Dispute Resolution;
Governing Laws;
Definitions (other than those covered in the NBFC Regulations and this Circular); and
Signatories to the Agreement and Witnesses.
Page 137 of 192
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Annexure-B
MINIMUM ADDITIONAL INFORMATION TO BE DISCLOSED IN OFFERING DOCUMENT OF ETF
AMCs shall ensure that the following disclosures are made in the offering document of an ETF in addition to the areas specified
in Schedule VIII of the NBFC Regulations.
INTRODUCTION TO ETF
(i)
(ii)
(iii)
(iv)
(v)
Description of ETF highlighting the basic features;
Advantages and disadvantages of ETF;
Difference between ETF and other Open ended Funds;
Parties to an ETF; and
Description of how an ETF works through a flow chart.
AUTHORIZED PARTICIPANT
(vi)
(vii)
(viii)
Role, Duties and Responsibilities of Authorized Participants;
Names and Contact information of Authorized Participants; and
Salient features of Authorized Participant Agreement.
BENCHMARK INDEX
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
Profile of Benchmark Index;
Constituent of Benchmark Index;
Circumstances under which Benchmark Index of ETF may change;
Disclosure of Risk Factors related to Benchmark Index;
Constituents of Benchmark Index and weightings of the top 10 largest constituent securities (where applicable) of the
benchmark index as of a date within a month of the date of the offering document;
Frequency with which benchmark index composition is reviewed;
Means by which investors may obtain the latest benchmark index information and other important news of the index;
and
Target tracking error.
OFFER / REDEMPTION OF UNITS
(xvii)
(xviii)
(xix)
(xx)
(xxi)
(xxii)
(xxiii)
Offer of units during Pre-Listing phase (Initial Offer);
Offer of units in Post-Listing phase;
Procedure of In Kind Creation;
Procedure of In-Kind Redemption; including monetary and time cost to the investor, and policy for partial shares;
Procedure of Trading of ETF units on exchange;
Timeline for issuance and redemption of Creation Units; and
Frequency and Notification of change in Portfolio Deposit.
INAV
(xxiv)
(xxv)
(xxvi)
Calculation Methodology of INAV;
Mode and frequency of dissemination of INAV; and
Entity responsible for transmitting INAV.
WARNINGS / RISKS
(xxvii)
(xxviii)
(xxix)
(xxx)
(xxxi)
(xxxii)
(xxxiii)
(xxxiv)
Where necessary, a statement to the effect that the investment of the scheme may be concentrated in the securities of
a single issuer or several issuers;
A statement to the effect that there is no guarantee or assurance of exact or identical replication at any time of the
performance of the benchmark index;
Circumstances that may lead to tracking errors and the related risks, and strategies employed in minimizing such
errors;
A warning that benchmark index composition may change and underlying securities may be delisted;
A warning in relation to any licensing conditions (including indemnity given to the index provider, if any) for using the
benchmark index, and the contingency plan in the event of cessation of the availability of the benchmark index;
A warning of lack of discretion to adapt to market changes due to the inherent investment nature of index funds and
that falls in the benchmark index are expected to result in corresponding falls in the value of the ETF;
A statement on whether the index provider and the AMC of the scheme (or its connected persons) are independent of
each other. If not, the means by which possible conflicts of interests may be addressed; and
Any other information which is relevant and material for investors to make an informed investment decision.
Page 138 of 192
Karachi Stock Exchange Regulations
Annexure-I
DOCUMENTS TO BE SUBMITTED WITH LISTING APPLICATION OF AN EXCHANGE TRADED FUND (ETF)
The following documents and particulars duly attested by the AMC shall be submitted to the Exchange at the time of application
for listing of its Fund as an ETF:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
Listing application under Securities & Exchange Ordinance, 1969 as per Form-I attached hereto;
Form for submission of undertaking and payment of fees as per Form-II attached hereto (Withholding tax payment
challans duly deposited shall also be submitted);
An unconditional undertaking on non-judicial stamp paper of Rs.20/- as per Form-III attached hereto;
Certified true copy of the Certificate of Incorporation of AMC managing the ETF;
Certified true copy of the Certificate of Commencement of Business of the AMC managing the ETF;
Certified true copy of the license to carry on Asset Management Services;
A copy of the Board Resolution of the AMC for listing of the Fund as an ETF;
Copy of Trust Deed approved by the Securities & Exchange Commission of Pakistan;
Brief description of the Investment Scheme and its main features;
Names of Directors of AMC along with their directorship of other companies listed on the Exchange (on AMC's letterhead);
List of Controlling Directors of the AMC;
Name and address of the directors and persons holding 10% or more of any class of equity security in the AMC as on the
date of application together with the number of shares held by each;
Copy of letter from Legal Advisor(s) consenting to act in their respective capacity;
Copy of letter from Consultant(s) to the issue, (if any) consenting to act in their respective capacity;
Copies of individual consent of all Directors, Chief Executive and Secretary of the AMC for publishing their names as
Directors, Chief Executive and Secretary in the Offering Document of the Fund/ ETF;
5 copies of Memorandum & Articles of Association of the AMC;
50 copies of the printed Offering Document of the Fund and 5 copies of the draft Offering Document;
Copies of the prospectus/offering document issued by the AMC in respect of any security already listed on the Stock
Exchange;
5 copies of each of the audited financial statements for the last 5 years or for a shorter period if the AMC is in operation
only for such period. The last audited accounts incorporated in the offering document shall not be older than 6 months
from the date of publication of the Offering Document;
Copy of application submitted with the Central Depository Company of Pakistan Limited for declaration of the ETF units as
CDC eligible securities;
Report of State Bank of Pakistan that the names of sponsors/controlling directors of the AMC are not in the Defaulter's List
of State Bank of Pakistan either in their individual capacity or in the capacity of Directors of other companies. (This will not
apply to nominee Directors of the Government and Financial Institutions);
Report of State Bank of Pakistan that the name of the AMC as well as the names of other companies in which directors of
the AMC are holding directorship is not in the defaulter's list of State Bank of Pakistan;
A statement containing particulars, dates and names of parties to all material contracts, agreements (including
agreements for technical advice and collaboration), concessions and similar other documents except those entered into in
the normal course of the business or intended business together with a brief description of the terms of such agreements;
A statement showing:(a) Dividends and cash bonuses paid during the last 10 years or such shorter period as the AMC/ETF may have been in
existence;
(b) Dividends or interest in arrears, if any.
25.
Certified copies of agreements with:(a) Authorized Participant (APA)
(b) Selling Agents
(c) Managing Director and Technical Directors
26.
Any other documents/material contract and such other particulars as may be required by the Exchange.
Note:
All the documents/information should be attested by the Chief Executive/Secretary of the AMC managing the ETF.
Page 139 of 192
Karachi Stock Exchange Regulations
FORM-I
FORM OF APPLICATION UNDER SECTION 9 OF THE SECURITIES AND EXCHANGE ORDINANCE, 1969 FOR LISTING A
SECURITY ON A STOCK EXCHANGE
Date:________________
The General Manager
Karachi Stock Exchange Limited
Karachi
Dear Sir,
1.
We hereby apply for the listing of our (name of the fund) on your Stock Exchange.
2.
Necessary information and documents as required in Annexure-I of the Regulations Governing Exchange Traded
Funds (ETF) of the Karachi Stock Exchange Limited are furnished.
Yours Sincerely,
SIGNATURE & ADDRESS
Copy to:
The Securities & Exchange Commission of Pakistan
ISLAMABAD
Page 140 of 192
Karachi Stock Exchange Regulations
FORM-II
FORM FOR SUBMISSION OF UNDERTAKING AND PAYMENT OF FEES
Date:________________
The General Manager
Karachi Stock Exchange Limited
Karachi
Dear Sir,
Re: LISTING ON THE STOCK EXCHANGE
With reference to our Listing application under Section 9 of the Securities and Exchange Ordinance, 1969, we enclose herewith
the following:
(1)
An unconditional undertaking under the Common Seal of the AMC duly signed in accordance with the provisions
contained in the Articles of Association of our AMC.
(2)
A cheque of Rs._____________ towards Listing Fee at the rate of one twentieth of one percent (1/20 of 1%) of the
total size of the Fund of Rs.________________ subject to maximum of Rs. 500,000.
(3)
A cheque of Rs._______________ towards Annual Listing Fee as per chapter 16 of these Regulations.
Yours Sincerely,
(Signature of Authorized Person)
Page 141 of 192
Karachi Stock Exchange Regulations
FORM-III
FORM OF UNCONDITIONAL UNDERTAKING ON NON-JUDICIAL STAMP PAPER
Date:______________
The Board of Directors
Karachi Stock Exchange Limited
Karachi
UNDERTAKING
We undertake, unconditionally, to abide by the KSE Regulations which presently are, or hereinafter may be in force.
We further undertake:
(1)
That the ETF units of our (Name of the Fund) shall be quoted on the Ready Quotation Board and/or the Futures
Counter at the discretion of the Exchange;
(2)
That the Exchange shall not be bound by our request to remove the ETF units from the Ready Quotation Board and/or
the Futures Counter;
(3)
That the Exchange shall have the right, at any time to suspend or remove the said ETF units for any reason which the
Exchange considers sufficient in public interest, subject however to the procedure laid down in Section 9 of the
Securities & Exchange Ordinance, 1969 and/or its Regulations;
(4)
That such provisions in the Articles of Association of our AMC or in any declaration or agreement relating to any other
security as are or otherwise not deemed by the Exchange to be in conformity with the chapter 5 of the KSE
Regulations shall, upon being called upon by the Exchange, be amended to supersede the Articles of Association of
our AMC or the nominee relating to the other securities to the extent indicated by the Exchange for purposes of
amendment and we shall not raise any objection in relation to a direction by the Exchange for such amendment; and
(5)
That our ETF may be delisted by the Exchange in the event of non-compliance and breach of this undertaking.
(Signature of Authorized Person)
Common Seal of the AMC
Page 142 of 192
Karachi Stock Exchange Regulations
Chapter 17:
STOCK INDEX FUTURES CONTRACT MARKET REGULATIONS
17.1.
DEFINITIONS:
(a)
“Contract Multiplier” shall mean, the Contract Multiplier for Stock/Sector Index Futures Contract, which shall be Rs.
5.00 or any other amount as may be determined by the Exchange from time to time with the prior approval of the
Commission;
“Contract Unit” shall mean, the contract unit shall be the numerical value of the underlying stock index;
“Contract Value” shall mean, Contract Unit multiplied by the contract multiplier as specified in the contract
specifications;
“Daily Settlement Value of the Stock Index Futures Contract” shall mean, Volume Weighted Average value of last half
hour of trading in the relevant Stock/Sector Index Futures Contract for cash settlement, multiplied by the contract
multiplier and expressed in Pakistani Rupees;
“Final Settlement Price of the Stock/Sector Index Futures Contract” shall mean, the price calculated based on a set of
121 readings of 15 second intervals (price points) of the underlying index levels taken between the last half an hour of
trading. The highest and lowest 20 price points will be ignored and the closing price computed as an average of the
remaining 81 price point will be the Final Settlement Price for the settlement of the contract;
“Index” shall mean, the KSE-30 Index or Sector Index as may be defined by the Board for the purpose of trading in
Stock Index Futures Market;
“Open interest in a Stock Index Futures Contract” shall mean, the total value of Contracts of a Broker or his clients, in a
Stock Index Futures Contract that have not been offset and closed at any point in time by an opposite transaction;
“Position in a Stock/Sector Index Futures Contract” shall mean, the sum of long and short positions of a broker and/or
his clients at any point in time in a Stock Index Futures Contract;
“Stock/Sector Index Futures Contract (SIFC)” shall mean, an Exchange “Index Contract” subject to these Regulations;
and as per the contract specifications provided in Annexure-A or as may be defined by the Board and approved by the
Commission;
“Stock Index Futures Contract Market (SIFC Market)” shall mean, a Market made available by the Exchange for
execution of SIFC, subject to these Regulations.
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
17.2.
TRADING:
17.2.1.
Trading in SIFC Market shall take place only through KATS.
17.2.2.
Any Broker can enter into SIFC Market under these Regulations subject to prior notification in writing to the KSE and
payment of basic deposit of the requisite amount in accordance with Deposits, Fees, Contributions and other Sums
Schedule.
17.2.3.
The Contract specifications as determined by the Board and approved by the Commission and attached hereto as
Annexure-A, shall form part of these Regulations.
17.2.4.
When a buyer/seller accepts a bid/offer of a SIFC, the Contract as specified as per Contract Specifications attached
hereto this chapter shall be deemed to have been executed between the buyer and the seller.
17.2.5.
All offers/bids made may be accepted for or up to the limit of the offer/bid and the Broker making an offer/bid shall be
bound by the terms of the SIFC.
17.2.6.
Upon opening of any SIFC, the Exchange shall notify the name, dates of opening, closing and settlement of the said
Contract and other relevant details as mentioned in Contract Specifications attached as Annexure-A to this chapter.
17.2.7.
There shall be one standardized 90 days SIFC which will be issued each month on the first trading day following last
Friday of each month. Each SIFC shall expire on the last Friday of the third month of the contract. The SIFC shall be
known by the month in which such contract is to expire e.g. a November SIF Contract would commence on the first
trading day following last Friday in August and would expire on the last Friday of November.
17.2.8.
The Expiration Date/Last Trading Day shall be the last Friday of the third month of the SIFC. If the last Friday is a
trading holiday the SIFC shall expire on the previous trading day.
17.2.9.
There shall be no adjustment for cash Dividends, Bonus and Right issue in the SIF Contracts.
17.2.10. In case Stock Index Futures Contracts trade beyond the limit of five percent from the previous day’s closing price of
the contract, the Exchange shall announce a market halt in Stock Index Future Market for at least 30 minutes and all
outstanding losses, till such time shall be collected by the Exchange. In case of default in payment of such losses,
default proceedings shall be initiated against the defaulting Broker.
17.2.11. Circuit Breaker shall also be applicable in Stock Index Futures Market in case of movement of 7.5%, above or below
the previous day closing price. In case of first trading day of a SIF Contract, circuit breaker shall apply on movement of
7.5% above or below the opening price of the day, as determined during the pre-open session. No circuit breaker will
be applicable on the last day of trading in a SIF Contract.
17.3.
CLEARING, SETTLEMENT AND RISK MANAGEMENT:
17.3.1.
Deposit against Exposure shall be payable by the Brokers at flat 12.50% of the total Exposure in SIFC Market. Any
change in the percentage of deposit against Exposure would be subject to prior approval of the Commission.
Page 143 of 192
Karachi Stock Exchange Regulations
17.3.2.
MtM Profit/Loss shall be calculated at the end of each trading day on all Positions in SIFC at the ‘Daily
Settlement Value’ in the following manner:
17.4.
NETTING REGIME ON MtM LOSS COLLECTION AND PROFIT DISTRIBUTION APPLICABLE TO SIF
CONTRACT:
17.4.1.
Netting shall only be permitted in profits and losses of the same client or Broker’s proprietary position in different SIFC
with different expiries. No other netting of profits and losses arising on positions in SIFC shall be permitted inter-alia
including netting of profits and losses across different markets, across different clients or across futures contracts
based on different indices.
17.4.2.
There shall be a daily Clearing and Settlement and profit/losses shall be collected/disbursed at the Daily Settlement
Value, in cash by the Clearing Company before commencement of trading on the next day in the manner prescribed
by the Clearing Company in NCCPL Regulations.
17.4.3.
Upon closing of SIFC, final settlement shall take place on the next trading day after expiry of SIFC and the resulting
profits or losses, calculated on the basis of Final Settlement Price shall be settled in cash. The collection and payment
of profits or losses on final settlement to/from brokers shall be done by the Clearing Company within the stipulated time
and in the prescribed manner as per NCCPL Regulations.
17.4.4.
In case any Broker fails to make any payment to the Exchange and Clearing Company within the stipulated time, the
Exchange and Clearing Company shall initiate necessary action against such Broker as per KSE Regulations and
NCCPL Regulations respectively.
17.4.5.
Net long and short positions of the Broker and his clients shall be added for the purpose of calculating Broker level
Open Interest.
17.4.6.
For the purpose of calculating the Open Interest limits, the cumulative Open Interest in all the Stock Index Future
Contracts would be taken into account.
17.4.7.
For the purpose of determining Market wide total Open Interest in any SIF Contract, sum of either all net buy positions
or all net sale positions on UIN basis in the SIF Contract shall be considered.
17.4.8.
For the purpose of determining Broker-level and client level Open Interest, no netting shall be allowed across offsetting
position in SIFC with different expiry date, for calculation of Position Limits.
17.5.
NETTING REGIME APPLICABLE TO 90 DAYS SIF CONTRACTS FOR DETERMINING THE MARKET EXPOSURE:
17.5.1.
Netting shall only be permitted between buy and sell positions in the same SIF Contracts with the same expiry date for
the same client. No other netting shall be permitted inter alia including netting across different markets, across different
clients, across SIF Contracts having different expiry dates or across Index Futures Contracts based on different
indices.
17.5.2.
Where the Exchange determines that circumstances warrant in the best interest of market and market participants that
a pre-close of the contracts is necessary, the Exchange may announce special clearing in the following manner:
(a)
(b)
The Exchange will announce a special clearing with prior approval of the Board.
For the purpose of settlement of outstanding SIF Contract, the Exchange will calculate a reference price as fair-value
of the contract on which all outstanding contracts will be settled.
Fair-Value is to be arrived at as a function of cash or underlying index value plus financing charges (determined as a
function of KIBOR rates) less any dividends that would accrue with the purchase and carry of all Index constituent until
the final settlement date.
The following formula shall be used to calculate fair-value for stock index futures:
(c)
(d)
= Underlying index [1+r(x/365)] – d
Where r=rate of interest, x=number of days to maturity and d=dividends.
17.5.3.
Special margin shall be payable by a Broker in respect of an SIFC if the difference between Daily Settlement Price and
the first day’s Daily Settlement Price of such contract on either side (i.e. upward or downward) is greater than 20%, or
where the Daily Settlement Price of the contract is outside the band of 15% of the underlying Index (higher amount
from above calculations will be applicable as special margins). Where the unidirectional price movement is upwards,
each client of a Broker who is a net buyer shall be required to pay a special margin in cash equal to such difference.
Where the unidirectional price movement is downward, each client of a Broker who is a net seller shall be required to
pay a special margin in cash equal to such difference.
17.6.
GENERAL:
The Exchange shall place on its website necessary and relevant information with respect to Open Interest and
theoretical future price (fair-value) of SIFC on daily basis.
Page 144 of 192
Karachi Stock Exchange Regulations
Annexure-A
CONTRACT SPECIFICATIONS
Underlying Index
SIFC Multiplier
Minimum Fluctuation
(Tick Size)
Maximum Fluctuation
(Tick Size)
Position Limits
Period of Contract
Opening of Contract
Overlapping Period
Expiration Date/ Last
Trading day
Final Settlement
Contract Unit
SIF Contract Value
Final Settlement Value
Daily Settlement Value
Margin Requirements
Underlying Index
SIF Contract Multiplier
Minimum Fluctuation
(Tick Size)
Maximum Fluctuation
(Tick Size)
Position Limits
Period of Contract
Opening of Contract
Overlapping Period
Expiration Date / Last
Trading day
Final Settlement
Contract Unit
SIF Contract Value
Final Settlement Value
Daily Settlement Value
Margin Requirements
KSE-30 INDEX
Rs. 5.00 per index point or any other amount as may be determined by the Exchange from time to time
with the prior approval of the Commission.
One Index Point
N/A
As prescribed under the chapter 19 of the KSE Regulations, governing Risk Management, as amended
from time to time.
90 days
First trading day of the next week following the close of the contract.
None.
Last Friday of the calendar month in which the contract is to expire.
Collection of Losses on T+0 basis, and disbursement of profit on T+1 basis through NCCPL’s Pay &
collect system.
The contract unit shall be the numerical value of the underlying stock index
The value of the Contract at the time of making the Contract shall be the price agreed to by the parties at
that time multiplied by the SIF Contract Multiplier and expressed in Pakistani Rupees
Final Settlement Price of the Stock/Sector Index Futures Contract shall be the price calculated based on
a set of 121 reading of 15 second intervals (price points) of the underlying index levels taken between
the last half an hour of trading. The highest and lowest 20 price points will be ignored and the closing
price computed as an average of the remaining 81 price point will be the Final Settlement Price for the
settlement of the contract.
Volume Weighted Average value of last half hour of trading in the relevant Stock Index Futures Contract
for cash settlement, multiplied by the SIF Contract Multiplier and expressed in Pakistani Rupees
Exposure Margin shall be 12.5%.
OIL AND GAS SECTOR, BANKING SECTOR
Rs. 5.00 per index point or any other amount as may be determined by the Exchange from time to time
with the prior approval of the Commission.
One Index Point
N/A
As prescribed under the chapter 19 of the KSE Regulations, governing Risk Management, as amended
from time to time.
90 days
First trading day of the next week following the close of the contract.
None
Last Friday of the respective calendar month in which the contract is to expire, for 90 days Standard
Contracts.
Collection of Losses on T+0 basis, and disbursement of profit on T+1 basis through NCCPL’s Pay &
collect system.
The contract unit shall be the numerical value of the underlying stock index.
The value of the Contract at the time of making the Contract shall be the price agreed to by the parties
at that time multiplied by the SIF Contract Multiplier and expressed in Pakistani Rupees.
Final Settlement Price of the Stock/Sector Index Futures Contract shall be the price calculated based
on a set of 121 reading of 15 second intervals (price points) of the underlying index levels taken
between the last half an hour of trading.
The highest and lowest 20 price points will be ignored and the closing price computed as an average of
the remaining 81 price points will be the Final Settlement Price for the settlement of the contract.
Volume Weighted Average value of last half hour of trading in the relevant Stock Index Futures Contract
for cash settlement, multiplied by the SIF Contract Multiplier and expressed in Pakistani Rupees.
Exposure Margin shall be 12.5%.
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Chapter 18: INVESTORS’ CLAIMS, BROKERS’ DISPUTES AND ARBITRATION REGULATIONS
18.1.
PERMANENT ARBITRATION PANEL:
18.1.1. RAC shall form a permanent Arbitration Panel (referred to as "Panel” in this chapter) which shall consist of a minimum
number of twenty members. The membership of the Panel shall include TRE Certificate Holders, senior management
staff of the Exchange and industry experts. Provided TRE Certificate Holders should not be more than five and
industry experts should not be less than ten. Provided further that the industry experts shall include advocates,
professional accountants or other persons having knowledge or experience in the field of law, trade, commerce,
industry, arbitration, securities market or the fields ancillary to the stock market, i.e., CDS, NCSS, etc. in accordance
with procedures laid down by the Exchange from time to time and subject to concurrence from the Commission.
The list of members of the Panel shall be displayed on the Exchange’s website and updated on quarterly basis. The
list shall also contain the details of the companies with which all members of the Panel have any association.
18.1.2. From the Panel, following will be the constitution of Arbitrators for arbitrations for the resolution of the disputes in
accordance with their categorization mentioned below:
Sub-Panel:
From the Panel, a Sub Panel of Arbitrators shall consist of three members, out of which one shall be the TRE
Certificate Holder, one industry expert and one senior member of KSE management as nominated by CRO in
consultation with the Managing Director- KSE. The Chairman of the Panel will always be the industry expert.
The TRE Certificate Holder and industry expert shall be selected by drawing lots.
Sole Arbitrator:
From the Panel, CRO in consultation with the Chairman or any other member of RAC shall appoint an industry expert
as a Sole Arbitrator excluding TRE Certificate Holders on case to case basis.
18.1.3. The CRO shall also nominate any official(s) of the Exchange as the secretary(ies) of the Sub-Panel(s) who shall deal
with complaints and Investors’ and Brokers’ disputes.
18.2.
DISPUTES TO BE REFERRED TO ARBITRATION:
Whenever any dispute arises between Brokers interse, or between any of the Brokers and their clients, or between any
of the Brokers and their Authorized Agents or between Authorized Agent(s) and their clients in connection with any
trade or transaction and is not otherwise settled amicably, it shall be referred to arbitration and shall be dealt with
according to the procedure laid down in this chapter.
18.3.
APPLICATION FOR ARBITRATION:
Where a dispute cannot be settled amicably, it must be referred to arbitration. Any party to the dispute may initiate
arbitration, in accordance with these Regulations by making an application in writing to the CRO. The applicant shall
be required to furnish the following:
(b)
Claim Form duly filled and signed by Investor or Broker or the Authorized Agent(s), as the case may be, along with all
supporting documents and annexure as mentioned in the Form.
In case applicant is not a Broker of the Exchange, he shall give an undertaking to abide by all these Regulations in
force for the arbitration, as well as the award of the Sole Arbitrator/Panel of Arbitrators appointed under this chapter of
these Regulations.
18.4.
ARBITRATION PROCEDURE:
(a)
18.4.1. SCRUTINY OF APPLICATION:
An application received for arbitration shall be scrutinized in the manner prescribed in the procedures by any official(s)
of the RAD designated by the CRO to check whether it is complete in all respects and acceptable for arbitration.
18.4.2. REJECTION OR DISMISSAL OF APPLICATION:
Any application may be rejected or dismissed, if:
(a)
(b)
(c)
(d)
The applicant refuses, neglects or fails to comply with the provisions of any Regulations; or
The applicant refuses, neglects or fails to carry out any direction issued by the CRO, RAC or the Board; or
The application is not otherwise in order or in accordance with these Regulations or lacking the adequate documentary
evidence after providing reasonable time for submission of requisite documents; or
The subject matter in the dispute has arisen from a transaction not carried out through the Trading Systems/facilitation
of the Exchange or not reported through the interface provided by the Exchange or the transaction is otherwise illegal
or private deals between two Brokers.
In case of rejection of any application, the Exchange shall, under intimation to the Commission, communicate the
reasons for any such rejection to the applicant within 15 days of receipt of application.
18.4.3. CLAIMS/DISPUTES UP TO FIVE HUNDRED THOUSAND RUPEES:
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Claims/disputes of up to five hundred thousand rupees shall be referred for arbitration to the Sole Arbitrator, who may
hear and decide the matter.
18.4.4. CLAIMS OF OVER FIVE HUNDRED THOUSAND RUPEES:
Claims of over five hundred thousand rupees shall be forwarded to the Sub-Panel for its action.
18.4.5. LOTS TO BE DRAWN:
(a)
(b)
The drawing of lots shall be conducted by the Chairman of RAC or any other member of the RAC nominated by him.
The names so selected shall be communicated to the parties to the arbitration within three working days from the
appointment.
In case any valid objection is raised within seven working days by any party to the dispute against appointing any
person as an Arbitrator, CRO in consultation with Chairman of RAC may appoint via fresh balloting any person from
the Panel as new member of Sub-Panel or appoint Sole Arbitrator in consultation with the Chairman of RAC as the
case may be. Provided that such objection on any member of the Sub-Panel/Sole Arbitrator shall be entertained only
once.
Provided that lots shall be drawn within thirty days from the date of receipt of any application for arbitration which is to
be referred to the Sole Arbitrator or Sub Panel.
(c)
Presence of parties at the time of drawing and/or re-drawing: The parties to the dispute shall be given a notice of
a minimum five working days, to remain present personally or through an authorized representative at the time of
drawing and/or re-drawing lots before the Chairman of the RAC or any other member of the RAC nominated by him.
Provided, that the drawing of lots shall take place at the given time and date even if the party or parties are not present
despite of the notice and that the party or parties shall have no objection to drawing of such lots.
Parties to the dispute shall be provided with a list of members of the Panel along with the above notice of drawing
and/or re-drawing lots.
(d)
There shall be no objection to an award of the Panel of Arbitrators or the Appellate Bench regarding any change(s) in
the composition of the Panel of Arbitrators or the Appellate Bench during the enquiry or appeal.
18.4.6. MEMBER OF THE PANEL BOUND TO ACT AS AN ARBITRATOR:
A member of the Panel whose name has been finalized by the CRO in consultation with Chairman or any other member
of the RAC shall be bound to act as an Arbitrator till the announcement of award.
18.4.7. FRESH ARBITRATOR:
In case if one or more Arbitrators refuse, neglect or fail to consider the dispute or give an award, fresh Arbitrator from the
Panel shall be appointed by the CRO or any other person nominated by him. However, the Arbitrator(s) who refused,
neglected or failed to consider the dispute or give an award shall communicate reasons thereof to the Panel, in writing,
within ten days of referral of the dispute to him/them.
Upon receipt of information of non-availability of any such Arbitrator, the Exchange shall immediately inform the
complainant of the new Arbitrator(s). The Exchange while intimating name of any alternate Arbitrator(s) to both parties to
a dispute may also reconfirm or reschedule the earlier date of hearing or arrange for any re-hearing held earlier by the
previous Arbitrators to be reheard;
(a)
Hearing Notice: The secretary of the Sub Panel shall give both parties to the dispute not less than seven days’
notice from the date of receipt of such notice by the parties regarding the date, time and the place appointed for
Arbitration.
(b)
Both parties present: If both parties to the dispute are present at the appointed date, time and place, the Sole
Arbitrator/Sub Panel shall proceed to hear the matter and to give the award.
(c)
Ex Parte decision on the summary disposal: If the defendant is not present or shows his inability to attend the
hearing at the appointed date, time and place for two consecutive times, the Sole Arbitrator/ Sub Panel may hear
and decide the dispute ex-parte, and if the party making the complaint has shown his inability to attend or fails to
make himself available for hearing at the appointed date, time and place for two consecutive times, the Sole
Arbitrator/Sub Panel may dismiss the complaint summarily.
(d)
Remedies at law: The Sole Arbitrator/ Sub Panel may decline to hear the dispute or may dismiss any case and
refer the parties to avail their remedies through a Court of Law by recording reasons for the decline or dismissal.
(e)
Equal opportunity to both parties: The parties shall be dealt with on an equal footing. Each of the parties shall be
given an equal opportunity to present before the Sole Arbitrator/Sub Panel and explain its point of view verbally or in
writing:
(i)
(ii)
(iii)
(iv)
the claimant will be given an opportunity to argue his case first;
the defendant will be given an opportunity to respond to the point of representations of the claimant;
the claimant will be given an opportunity to respond to the arguments of the defendant after defendant has
finished his argument;
the Sole Arbitrator/ Sub Panel will not hear any party in the absence of the opposing party, unless the latter
party has been given every reasonable opportunity to attend and it has failed to attend;
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(v)
the Sole Arbitrator/ Sub Panel will not discuss the case with the parties to the proceedings beyond the normal
procedure;
(vi)
the parties may appear at a session in person or through a representative to present and explain their
respective claim or to defend verbally or, with the permission of the Sole Arbitrator/ Sub Panel, in writing.
(f)
Decision by majority in cases referred to Arbitrators: All claims/disputes referred to the Sub Panel shall be
decided by majority and such decision shall be deemed to be the award (‘Award’) in the arbitration.
(g)
Time for disposal of application: An application received under above provision of this chapter and found
acceptable after scrutiny shall be disposed-off within ninety days of its receipt including the award of Sole Arbitrator/
Sub Panel. However, if the application is not disposed-off within the prescribed time due to unavoidable
circumstances or reasons beyond control, the specific reasons for the delay shall be communicated in writing to both
the parties to the dispute and the Commission. The time extension granted by the CRO or anyone nominated by
CRO shall be indicated in the communication, which shall not exceed thirty working days from the expiry date of the
prescribed ninety (90) days.
(h)
Fee for making an application for arbitration: The fee for filing an application for arbitration will be submitted by
the applicant as follows:
(i)
(ii)
(iii)
(iv)
Rs.2,000/- for dispute having value up to Rs.100,000/Rs.4,000/- for dispute having value more than Rs.100,000/- and up to Rs.300,000/Rs.6,000/- for dispute having value more than Rs.300,000/- and up to Rs.1,000,000/Rs.10,000/- for dispute having value more than Rs.1,000,000/Fifty percent (50%) of initial deposited fee will be refunded to the applicant if Award is announced in his favor.
(i)
Entitlement of corporate benefits issued during the dispute: The Award would include provision for any
corporate benefits (right shares, dividends and bonuses) issued during the pendency of dispute for the securities for
which the application for arbitration has been made. The disputed period would be up to the date on which an Award
is honored.
(j)
Time period for retaining arbitration record: Record of proceedings of all meetings, hearings and the evidences
on the basis of which the Award was announced shall be retained for at least ten years.
(k)
Time period to comply with the Award: The parties to the dispute shall implement/comply with the Award within
fifteen days of announcement by the Sole Arbitrator/ Sub Panel.
18.5.
LATE CLAIMS BARRED:
The Sole Arbitrator/ Sub Panel of Arbitrators shall not take cognizance of any claim or dispute which is not referred to it
within three year from the date it arose.
Provided that a claim may be admitted after the lapse of three years but not more than 10 years if the investor is able to
demonstrate that the delay was due to reasons beyond his control.
18.6.
APPEAL TO RAC:
18.6.1. A party to a dispute that is dissatisfied with any award of the Sole Arbitrator or the Sub Panels, as the case may be, may
appeal to the RAC against such an Award within fifteen working days of receipt of the Award.
RAC may constitute one or more sub panels (hereinafter referred as “Appellate Panel”) consisting of five members for
hearing appeals against Awards of the Sole Arbitrator/Sub Panel. RAC may appoint any member of the Arbitration Panel
in the said Appellate Panel provided he has not been the Arbitrator of the Award against which appeal has been filed with
the RAC. Provided further that Appellate Panel shall not include a TRE Certificate Holder.
18.6.2. A party appealing to the Appellate Panel shall state in writing the point wise objections to the Award of the Sole
Arbitrator/ Sub Panel and shall pay a fee of two thousand five hundred rupees being institution fee through cheque in
favor of the Exchange in its designated bank account. Further, if the appellant is a Broker, he shall deposit the full
amount of Award and deliver the securities or the value thereof at the ruling market price of the securities with the
Exchange. If the appellant fails in his appeal, he shall satisfy the Award within seven days of its announcement. In case
of his failure to do so, the Exchange shall have the authority to pay the amount of the Award and securities to the
respondent on the appellant's behalf. However, the appellant shall still be liable to pay the balance securities/amounts, if
any, payable under the Award in appeal. An appeal shall not be entertained if the required fee/award money or
securities, if any, is not deposited with the Exchange specially with respect to corporate benefits missed upto the date of
order.
18.6.3. The decision of the Appellate Panel shall be announced within forty five days of the receipt of the appeal. However, in
case the Appellate Panel is unable to announce the decision within the forty five days period due to unavoidable
circumstances or reasons beyond control, the Appellate Panel will seek further time from the Chairman of the RAC, by
indicating specific reasons for its inability to announce the decision and the Chairman of the RAC may extend the time
but not more than thirty days. However, such extension of time should be forthwith intimated to the Commission.
18.6.4. The decision of the Appellate Panel shall be final and deemed binding on the parties to the dispute and upon their
constituents.
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The decision of the Appellate Panel shall be implemented /complied with by the parties in dispute within seven (07) days
of its announcement.
18.7.
MEMBERS INVOLVED NOT TO HEAR THE CASE/APPEAL:
A member of the Sub Panel or the Appellate Panel, as the case maybe, shall not be appointed as an Arbitrator or a
member of the Appellate Panel, as the case maybe, in a dispute in which he is a party and/or has association with either
party, whatsoever. Before arbitration or hearing of appeal, the selected member will give a declaration in writing that he
has no conflict of interest in dispute under discussion.
18.8.
MISCELLANEOUS:
18.8.1. There shall be no objection to an Award of the Sole Arbitrator/ Sub Panel or the decision of the Appellate Panel on the
ground that the hearing at which a dispute was enquired into or an appeal was heard was adjourned or that the enquiry
was not completed or that the appeal was not finally heard at one meeting. Provided that the Sole Arbitrator/ Sub Panel/
Appellate Panel as the case maybe, shall record reasons for every adjournment, non-completion and non-hearing of
appeal.
18.8.2. There shall be no objection to an Award of the Arbitrators or the decision of the Appellate Panel on the ground of
substitution of an Arbitrator or any member of the Appellate Panel during the enquiry or appeal. Provided that on any
substitution of an Arbitrator or any member of the Appellate Panel, the matter shall be heard afresh by the Arbitrators or
the Appellate Panel, as the case may be.
18.8.3. Three members of the Sub Panel of Arbitrators or the Appellate Panel shall be necessary to constitute a quorum for the
purpose of the enquiry or appeal.
18.8.4. In case the Arbitrators or the Appellate Panel fail to reach a unanimous decision, the decision of the majority will prevail.
18.9.
SUMMARY DISMISSAL AND EX-PARTE DECISION:
If any party to a dispute who has appealed against any Award to the Appellate Panel is not present at the time fixed for
hearing the appeal or any adjournment thereof, the Appellate Panel, may dismiss the appeal summarily. However, in
case the appellant is present but the respondent is absent, the Appellate Panel may proceed with the appeal ex-parte.
18.10. SETTING ASIDE EX-PARTE AWARD:
The RAC may, on sufficient cause being shown by any party against whom any ex-parte decision has been announced,
set aside such decision and direct the reference or the appeal to be reheard. Sufficient cause for the purpose of this
Regulation shall mean and include non-receipt of notice/absence of party from the city/country etc.
18.11. EXTENSION OF TIME:
The Sole Arbitrator/Sub Panel / Appellate Panel, as the case maybe, may for special reasons extend the time for which a
reference for Arbitration or an appeal against any Award of the Sole Arbitrator or the Sub Panel may be made whether or
not the time for making the same has expired.
18.12. PLACEMENT OF NAME OF DELINQUENT CLIENTS ON THE EXCHANGE WEBSITE:
In case an application is filed for arbitration by a Broker against his client and the Award goes in favor of the Broker, the
client shall be liable to pay an amount (debit/margin) to the Broker and the same would be explicitly mentioned in the
Award.
In case:
(a)
(b)
(c)
An Award of the Sole Arbitrator/ Sub Panel has been passed against a client of a Broker and the maximum time to
file an appeal against the Award has elapsed; or
In case such client of a Broker had filed an appeal in accordance with these Regulations and the Appellate Panel
dismissed such appeal; and
In both cases the client of a Broker failed or refused to abide by or carry out such Award/decision; then the name
and other particulars of that client of the Broker shall be placed on the website of the Exchange accessible to Broker
by following a procedure. Placement of name of such delinquent client of a Broker on the web interface of the
Exchange shall be without prejudice to the right of the Broker concerned to apply to the court of competent
jurisdiction for making the Award a rule of the court and enforce the same through a decree of the court.
Further, the UIN of such client will be black-listed and such person will not be allowed to trade for three years.
18.13. ADMINISTRATION OF OATHS TO THE PARTIES TO THE DISPUTE:
The arbitrator shall administer oath to the parties and witnesses before examining them.
18.14. UNDERTAKING BY BOTH PARTIES TO THE DISPUTE/CLAIM:
Both the parties appearing before Sole Arbitrator/ Sub Panel/Appellate Panel shall be required to sign the following
undertaking:
(a)
I will say the truth, nothing but the truth and will not try to mislead the Sole Arbitrator/Sub Panel /Appellate Panel;
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(b)
(c)
I will provide all information asked by the Sole Arbitrator/Panel of Arbitrators/Appellate Panel within such time as
may be specified by the Sole Arbitrator/Panel of Arbitrators/Appellate Panel and in case of failure the Sole
Arbitrator/Panel of Arbitrators/Appellate Panel may decide the case on available facts;
I hereby declare that I shall abide by the award of Sole Arbitrator / Panel of Arbitrators/Appellate Panel, as the case
may be, within stipulated time.
18.15. VERIFICATION OF INVESTORS’ CLAIMS, INSPECTION OF BOOKS & RECORDS AND CONDUCTING OF
ENQUIRY:
The Exchange may verify genuineness of investors’ claims against a Broker and may inspect books and
records of any Broker and/or conduct enquiry into his dealings and business affairs and for this purpose may also
appoint an auditor selected from the panel of auditors prescribed under the chapter 23 of these Regulations. The cost
of audit shall be borne by the concerned Broker/TRE Certificate Holder.
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Chapter 19:
RISK MANAGEMENT REGULATIONS
19.1. OVERRIDING EFFECT:
In case of any conflict or inconsistency between this chapter and any other chapters of these Regulations, this chapter
shall prevail to the extent of such conflict or inconsistency.
19.2. DEFINITIONS AND METHODOLOGIES:
19.2.1. In this chapter, the following expressions shall, unless the context requires otherwise, have the meanings herein
specified below:
“All Markets” shall mean the different markets provided by the Exchange and are governed under these Regulations
which include Ready Delivery Contract Market which includes ODD Lots market, Leveraged Market, Deliverable
Futures Contract Market, Cash-Settled Futures Contract Market, Stock Indices Futures Contract Market, Index
Options Market and Futures Trading in Provisionally Listed Companies Market, and any other market which the
Board may provide for with the prior approval of the Commission and individually referred to as a “Market”;
(b) “Bank Guarantee” shall mean a Guarantee issued by a bank as mentioned below and deposited by the Brokers of
the Exchange in the form acceptable to the Exchange in order to fulfill their collateral requirements against their
Exposure Margins, Mark-to-Market Losses and where applicable Special Margins, provided that such Guarantees
are issued by such banks which meets the following criteria for this purpose.
(a)
The Bank:
(i)
(ii)
is duly licensed to carry on banking business in Pakistan under the Banking Companies Ordinance, 1962 (LVII
of 1962), or, being a statutory corporation, it is otherwise entitled to carry on banking business under the law it is
created;
has been allocated minimum credit rating of ‘A’. Provided that, where a bank has been allocated credit rating of
‘A’, the maximum amount of such Guarantee per Broker is limited up to Rs.400 million, whereas in case of ‘AA’
or above credit rated bank, the maximum amount of such Guarantee per Broker is limited up to Rs.1.0 billion;
and
The Exchange shall maintain a list of banks which satisfy the aforementioned eligibility criteria for issuing the Bank
Guarantees acceptable to the Exchange for satisfying collateral requirements.
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
“Blocked Account” means a CDC account established by the Exchange in accordance with clause (c) of sub-section
(1) of section 5 of the Stock Exchanges (Corporatization, Demutualization and Integration) Act, 2012;
“Call Option” shall have the same meaning as ascribed thereto in the Regulations Governing Index Option Contracts
of the Exchange;
“Cash Settled Futures Market” shall mean a market as envisaged under chapter 14 of these Regulations Governing
Cash Settled Futures Contracts of the Exchange;
“Deliverable Futures Contract Market” shall mean a market as envisaged under chapter 13 of these Regulations
Governing Deliverable Futures Contracts of the Exchange;
“Financing Participation Ratio (“FPR”)” shall have the same meaning as ascribed thereto in the regulations framed
by the NCCPL in respect of MT Market and MF Market;
“Haircut” shall mean the percentage rates on which the Margin Eligible Securities are discounted for valuation
purpose based on their liquidity and volatility;
“Impact Cost” (IC) represents the amount of adverse price movement in fulfilling an order size of Rs.500,000/- or any
other amount as prescribed by the Exchange with the prior approval of the Commission, during the last six months.
The IC is calculated on a real time basis and is adjusted for every change in the order book due to an order size of
Rs.500,000/- or any other amount prescribed in the above manner.
“Index Options Market” shall mean a market as envisaged under chapter 15 of these Regulations Governing ‘Index
Option Contracts’ of the Exchange;
“Leveraged Buy” shall mean a buy trade executed in the Ready Market through a separate function key which will be
available at NCCPL for financing through MT Market;
“Margin Eligible Security” shall mean:
(i) Such listed security that meets the quantitative and qualitative criteria laid down by the Exchange and approved
by the Commission from time to time. Such criteria shall inter alia include selection of securities on the basis of
highest daily turnover and lowest impact cost during the last 6 months;
(ii) Treasury Bills (T-Bills), Pakistan Investment Bonds (PIBs) and listed National Saving Bonds valued in
accordance with the methodology prescribed by the Exchange from time to time with prior approval of the
Commission;
(iii) Any other highly liquid security allowed by the Board with prior approval of the Commission.
“MF Market” shall mean Margin Financing Market established and governed under the regulations framed by the
NCCPL;
“MT Market” shall mean Margin Trading Market established and governed under the regulations framed by the
NCCPL;
“MT(R) Transaction” shall have the same meaning as ascribed thereto in the regulations framed by the NCCPL in
respect of MT Market;
“MT Transactions” shall have the same meaning as ascribed thereto in the regulations framed by the NCCPL in
respect of MT Market;
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(q)
(r)
(s)
(t)
(u)
(v)
(w)
(x)
(y)
(z)
(aa)
(bb)
(cc)
“Option Contract” shall have the same meaning as ascribed thereto in the Regulations Governing Index Option
Contracts of the Exchange;
“Option Series” shall have the same meaning as ascribed thereto in the Regulations Governing Index Option
Contracts of the Exchange;
“Option Seller” shall have the same meaning as ascribed thereto in the Regulations Governing Index Option
Contracts of the Exchange;
“Option Writer” shall have the same meaning as ascribed thereto in the Regulations Governing Index Option
Contracts of the Exchange;
“Pre-Trade Margin” shall mean the initial margin payable in advance by a Broker at order entry level in Exchange
Trading System;
“Put Option” shall have the same meaning as ascribed thereto in the Regulations Governing Index Option Contracts
of the Exchange;
“RiskMeter” shall mean a computer application developed for calculation of VaR margins;
“Stock Index Futures Contract (SIFC) Market” shall mean a market as envisaged under the chapter 17 governing
Stock Index Futures Contract of the Exchange;
“Transaction Price” shall mean the price at which the trade is executed on the Exchange Trading System;
“Type of Option” shall have the same meaning as ascribed thereto in the Regulations Governing Index Option
Contracts of the Exchange;
“VaR Estimates” shall mean a sum of VaR, scaled up by a factor of √n to cover “n” days risk based on underlying
stock liquidity, and Worst Case Margin;
“VaR or Raw VaR” shall mean the maximum amount of money that can be lost on a portfolio over a given period of
time, with a given level of confidence as determined by the RiskMeter;
“Worst Case Margin (WCM)” shall mean a margin that covers stock/index movement in extreme events in a day in
situations that lie outside the coverage of the Raw VaR calculations.
19.2.2. All other words and expressions used but not defined in these regulations shall, unless there is anything repugnant in the
subject or context, have the same meanings as assigned to them under the Securities and Exchange Ordinance, 1969,
the rules and regulations made thereunder and NCCPL Regulations.
19.2.3. METHODOLOGIES:
(a)
The Closing Price of a Security eligible for trading under respective Market is determined as per following
methodology:
(i)
If the cumulative volume in a security is at least 500 shares or Rs. 25,000/ -, whichever comes earlier (here in
after referred to as the “threshold”) then the Closing Price of that security shall be determined as Volume
Weighted Average (VWA) price of trades of last 30 minutes before closing of the market.
(ii)
If the cumulative volume in a security during last 30 minutes before closing is less than the threshold, then the
Closing Price of that security shall be determined as VWA of the most recent executed trades during the day
which constitute the threshold.
(iii) If cumulative volume is less than the threshold or there is no volume in the security during the whole trading
day, then Closing Price shall be the VWA of executed trades and either all bids or all offers entered in KATS
during the whole trading day. Such VWA price must be better than the previous day’s Closing Price, provided
that:
i. Cumulative volume of either all bids or all offers entered at order level and executed trades are equal to or
greater than the threshold.
ii. Such bids or offers are entered in KATS at least two hours before the market close and remained
unchanged during such period.
iii. Such bids or offers are available for trade at the time of closure of the market.
Explanation: The term “better”, for the purposes of this clause, means the following;
i.
if VWA price of all bids and executed trades is greater than the previous day’s Closing Price, the VWA of
all bids and executed trades; otherwise
ii.
if VWA price of all offers and executed trades is less than the previous day’s Closing Price, the VWA of all
offers and executed trades; otherwise
iii.
where both (i) and (ii) above do not apply, then the previous day’s Closing Price shall be applicable.
(iv) In case, bid or offer price does not meet the above criteria; the Closing Price of the scrip shall remain
unchanged from the previous day’s Closing Price.
(v)
Cross trades at Broker’s level, and trades which are executed under the same UIN, if any, shall not be eligible
for the determination of Closing Price of the respective scrip.
Provided that in case no trade takes place during the whole trading day in the Deliverable Futures Contract Market
or Cash-Settled Futures Contract Market in a particular security, the Closing Price of that security for respective
futures market will be updated on the basis of Theoretical Price.
(b)
The Exposure of a Broker is determined as per following methodology:
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(i)
Actual traded values of the trades executed on account of a UIN on Trading System are taken for the purpose
of calculating Exposure of respective UIN.
(ii)
The impact of rectification of erroneous trades on UIN basis carried out on the same trading day in the manner
and procedure prescribed by the Exchange from time to time shall also be taken for the purpose of calculating
Exposure of a respective UIN.
(iii) All trades due for settlement on that day will be excluded for calculation of Exposures, once settled.
(c)
The Theoretical Price for a Security tradable under Deliverable Futures Contract and/or Cash-Settled Futures
Contracts Markets, if there is no trading in such Security in the respective market during whole trading day, is
determined as per following methodology:
(i)
The Closing Price of underlying Security in the Ready Delivery Contract market x {1+(One Month KIBOR+4%) /
365 X DTM};
(ii)
In case of ex-entitlement Contracts, the Theoretical Price will be adjusted based on ex-price adjustment
formulas determined by the Exchange.
Whereas DTM stands for Date to Maturity which will be equivalent to calendar days difference in the Settlement Dates of
the Ready Delivery Contract market and Deliverable Futures Contract or Cash-Settled Futures Contract on any applied
trade date.
19.3. BASE MINIMUM CAPITAL AND CAPITAL ADEQUACY:
19.3.1. BASE MINIMUM CAPITAL:
Every Broker desiring to trade in any Market shall be required to maintain a Base Minimum Capital of the amount and in
the form as calculated/prescribed in Schedule-1annexed to this chapter.
19.3.2. CAPITAL ADEQUACY:
The Net Capital Balance (‘NCB’) for the purpose of these Regulations shall be calculated in accordance with the Third
Schedule to the Securities & Exchange Rules, 1971 and its certificates will be submitted to Exchange in the following
manner:
Maximum Exposure in each and/or All Markets of a Broker shall not exceed the number of times of his NCB
attributed to the Exchange for the purpose, as provided in Schedule-II to this chapter;
(b) The Brokers shall submit bi-annually a certificate from its last Statutory Auditor confirming their NCB on the format
prescribed by the Exchange on the dates and within such time as may be notified by the Exchange for this purpose ;
(c) The certificate submitted by the Brokers in accordance with the regulation 19.3.2.(a) above shall specify that the
Auditor has verified/audited the NCB; and
(d) NCB certificate shall be submitted by the Brokers within the time as may be prescribed by the Exchange, failing
which a penalty shall be imposed as provided in the Schedule-VI attached to this chapter.
(a)
19.3.3. MONITORING:
The Exchange shall monitor Brokers’ compliance with the Exposure limits and availability of margins as prescribed by or
pursuant to these Regulations. Such monitoring, however, shall not in any manner diminish the responsibility of the
Brokers to ensure compliance with these Regulations.
19.4. EXPOSURE AND NETTING:
19.4.1. DETERMINATION OF EXPOSURE:
(a)
Security-wise, UIN-wise and Market-wise Exposure of each Broker will be calculated by the Risk Management
System of the Exchange at any point of time subject to applicable netting rules, as prescribed by these Regulations.
Provided that in case of Ready Delivery Contract Market, Exposure of each Broker shall be calculated at the higher
of the values determined either by summing-up all settlement day wise net outstanding buy positions or all
settlement day wise net outstanding sale positions of the same client in the same security in the Ready Delivery
Contract Market at any point in time, subject to the applicable netting rules as prescribed by these Regulations.
(b)
The Exposure of a Broker in respect of the trades executed on behalf of his institutional clients which are NonBroker Clearing Members of NCCPL and affirmed by the respective Non-Broker Clearing Members shall be reduced
to the extent of such trades after receiving confirmation from the NCCPL that the Exposure margins and MtM Losses
computed in accordance with NCCPL Regulations have been duly deposited by such Non-Broker Clearing Member
with the NCCPL. In case of default by a Non-Broker Clearing Member on affirmed trades, to fulfill its securities or
money obligations towards NCCPL on the settlement date, default proceedings shall be carried out in accordance
with NCCPL Regulations. Un-affirmed trades shall be the proprietary trades of the Broker in the same market and
included while calculating Exposure and relevant margins of the Broker.
(c)
No netting whatsoever, in any Market, shall be allowed for the purpose of calculation of Exposure and relevant
margins in lieu of Margin Financing transactions.
(d)
Exposure during Calendar Spreads in DFC and CSF Markets: During the over-lapping period of DFC or CSF
Contracts, the Exposure in a particular scrip will be calculated based on the higher of Contract period-wise net-buys
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and net sales based on netting mechanism explained in clause 19.4.4. (Netting within Deliverable Futures Market
and 19.4.5. (Netting within CSF (Cash-Settled Futures) Markets. However, all Contract period-wise net-buys or net
sales will be added together for determining total Exposure under one UIN in a security.
(e)
Exposure of a Broker in Index Options Market shall be calculated by summing up all the contract values of his
proprietary and clients’ short positions as an Option Writer and/or Option Seller subject to the netting rules
prescribed below. Provided that in the case of short positions in Call and Put Options in same Option Series,
Exposure shall be calculated at the higher of contract values of such Put or Call options. The Exposure of a Broker
in Index Options Market shall also include sum of all his proprietary and clients’ outstanding obligations in respect of
option premium of all Option Contracts purchased during a trading day.
19.4.2. NETTING - GENERAL RULE:
Except as expressly provided otherwise in these Regulations, no netting of Open Positions shall be allowed across
Markets.
19.4.3. NETTING WITHIN READY DELIVERY CONTRACT MARKET:
Netting shall be allowed between buy and sell positions in the same security for the same Settlement Day for the same
UIN (client). Likewise buy and sell positions of a Broker’s proprietary UIN in same security for the same Settlement Day
shall be netted against each other.
19.4.4. NETTING WITHIN DELIVERABLE FUTURES MARKET (INCLUDING PROVISIONALLY LISTED SECURITIES):
Netting shall be allowed between buy and sell positions in the same security for the same client in the same contract
period. Likewise buy and sell positions in same security in the same contract period for the proprietary trades of a Broker
can be netted against each other.
19.4.5. NETTING WITHIN CSF (CASH-SETTLED FUTURES) MARKET:
CSF Market shall be considered a separate market for the purposes of calculating Exposure of a Broker and netting shall
not be allowed with Ready or Deliverable Futures Contract Market.
Netting shall only be allowed between buy and sell positions in the same security for the same client in the same contract
period. Likewise buy and sell positions in same security in the same contract period for the proprietary trades of a Broker
can be netted against each other.
19.4.6. NETTING WITHIN STOCK INDEX FUTURES CONTRACT MARKET:
For the determination of the market Exposure for 90 Days SIF Contracts following netting regime shall be applicable:
(a)
Netting shall only be permitted between buy and sell positions in the same SIF Contracts with the same expiry date
for the same client. No other netting shall be permitted inter-alia including netting across different markets, across
different clients, across SIF Contracts having different expiry dates or across index futures contracts based on
different indices.
(b)
Where the Exchange determines that circumstances warrant in the best interest of market and market participants
that a pre-close of the contracts is necessary, the Exchange may announce special clearing in the following manner:
The Exchange will announce a special clearing with prior approval of the Board.
For the purpose of settlement of outstanding SIF Contract, the Exchange will calculate a reference price as fairvalue of the contract on which all outstanding contracts will be settled.
(iii) Fair-Value is to be arrived at as a function of cash or underlying index value plus financing charges (determined
as a function of KIBOR rates) less any dividends that would accrue with the purchase and carry of all Index
constituent until the final settlement date.
(iv) The following formula shall be used to calculate fair-value for stock index futures:
(i)
(ii)
= Underlying index [1+r(x/365)] – d
Where r=rate of interest, x=number of days to maturity and d=dividends
Special margin shall be payable by a Broker in respect of an SIF Contract if the difference between Daily Settlement
Price and the first day’s Daily Settlement Price of such contract on either side (i.e. upward or downward) is greater than
20%, or where the Daily Settlement Price of the contract is outside the band of 15% of the underlying Index (higher
amount from above calculations will be applicable as special margins). Where the unidirectional price movement is
upwards, each client of a Broker who is a net buyer shall be required to pay a special margin in cash equal to such
difference. Where the unidirectional price movement is downward, each client of a Broker who is a net seller shall be
required to pay a special margin in cash equal to such difference.
19.4.7. NETTING WITHIN MT TRANSACTION:
Only MT (R) Transaction communicated to the Exchange will be netted off with a sale by a Broker on account of
respective UIN in the respective security, otherwise no netting whatsoever shall be allowed with the Ready Delivery
Contract Market.
19.4.8. NETTING WITHIN INDEX OPTIONS MARKET:
Index Options Market shall be considered a separate market for the purpose of calculating exposure of a Broker and
netting shall not be allowed with any other Market.
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Netting shall be allowed between the short positions of a client as an Option Writer and/or Option Seller and his buy
positions in an Option Contract of equal Contract Value, having same Option Type and same Option Series. Likewise,
proprietary position as an Option Writer and/or Option Seller and buy position in an option contract of equal Contract
Value, having same option type and same Option Series can be netted against each other.
No other netting shall be permitted inter-alia including netting across different markets, across different clients, across
Option Contracts having different expiry dates or different Underlying Index.
19.4.9. RESTRICTION/PROHIBITION:
Save as specifically provided above or in the relevant chapters of the KSE Regulations in case of 19.4.6. and 19.4.7.
above, no other netting such as across clients, across markets, across contract period, across settlement period, across
different securities or contracts shall be allowed whatsoever.
19.5. EXPOSURE MARGINS:
19.5.1. MARGIN REQUIREMENTS:
(a)
All trades in any security or securities shall be subject to the margin requirements prescribed in these Regulations or
such other additional margins in this regard as the Exchange may, with the prior permission of the Commission, from
time to time prescribe in addition hereto.
However, the total margins requirements (including initial margins, Concentration margins and/or Special Margins)
added together, for particular scrip under a UIN should not exceed its Exposure amount in any case. In case, where
total margin requirements exceed the Exposure amount, Special Margins requirements shall be reduced to the
extent of the exceeding amount.
(b)
Pre-Settlement under Ready Delivery Contract Market or Deliverable Futures Contract Market: In case where a UINwise net-seller in a security deposits the net-sold deliveries and/or net-buyer in a security deposits net cash against
such net-buy with the Exchange or NCCPL, all his margin requirements and MtM Losses/Profits to the extent of
such pre-settlement shall not be taken into account by the Exchange, while calculating such Broker’s Capital
Adequacy limits and margin requirements for respective market.
19.5.2. VAR BASED MARGINS:
(a)
CATEGORIZATION OF SECURITIES:
The securities shall be classified into four categories on the basis of following:
CATEGORY
A
B
C
illiquid - D
(b)
SCALE UP
FACTOR
1
√3
NO. OF DAYS COUNT (BASED ON
AVAILABILITY OF RS.500,000 TRADE DATA)
≥ 80% of traded days
≥ 80% of traded days
≥ 80% of traded days
√5
< 80% of traded days
If the tradable days even with one (1) lot in a scrip is less than 33%
IMPACT COST
≤ 1%
> 1% ≤ 2%
> 2%
Irrespective of IC
MONTHLY REVIEW:
The trading frequency and the Impact Cost shall be calculated on the 15th of each month on rolling basis
considering the data of preceding six months. On the basis of the trading frequency and impact cost so calculated,
the securities shall move from one group to another from the next trading day.
(c)
CALCULATION OF VAR MARGIN:
VaR margin will be based on Risk Meter calculation using the following three methods:
(i)
(ii)
(iii)
Variance/ Covariance,
Historical/Filtered Historical Simulations, and
Exponentially Weighted Moving Averages (EWMA)
The highest VaR margin calculated under the above three methods is taken as the VaR or Raw VaR.
The Raw VaR is then scaled up by a factor of √n to cover an ‘n’ day risk based on the underlying scrip’s liquidity as
demonstrated by its categorization on the basis of trading frequency and impact cost in 19.5.2.(a) above. Based on
the respective categorization, the Raw VaR numbers for each scrip are then scaled up by a factor of √1, √3 and √5
respectively. For securities falling in the D category, maximum VaR i.e., 60% shall be applied. The number so
arrived shall be called as Scaled up VaR.
A Worst Case Margin is added to the Scaled up VaR to cover 1% of the days (extreme events) that go beyond those
envisaged on the 99% value at risk estimates used in the calculation of Raw VaR. The margin so arrived shall be
known as the VaR Estimate.
The Worst Case Margin is the higher of:
i. 5%
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ii. 1.5 times the standard deviation of daily returns of the stock price in the preceding six months or one year
(whichever is higher) and
iii. Maximum breach in the security’s VaR back tested over one year trading days (peaks over threshold)
(d)
The Exposure margins for each security in Ready and Deliverable Futures Contracts markets shall be calculated by
the Exchange applying VaR Estimates calculated by the Risk Meter at the end of each trading day.
(e)
The Exposure margins for each Security in Cash-Settled Futures Contract Market shall be calculated by the
Exchange applying Scaled-up VaR calculated by the Risk Meter at the end of each trading day.
(f)
The Exposure margins in Stock Index Options Markets shall be calculated by the Exchange applying VaR of the
underlying index calculated by the Risk Meter at the end of each trading day and adding Worst Case Margin. The
deposit against exposure will be payable by the Brokers at flat 12.5% of the total exposure in the Stock Indices
Futures Market.
(g)
The Exposure margins so determined shall be posted on website of the Exchange and shall be applicable for
determining margin requirement at the end of each trading day.
19.5.3. FIXED MARGINS:
Exposure margins during the first six months of listing of a security on the Exchange shall be 25% of the Exposure.
19.5.4. DEPOSIT OF EXPOSURE MARGINS:
(a)
The Exposure margins shall be deposited by a Broker within such time as may be determined by the Exchange from
time to time but in no case later than the opening of the market on the next trading day.
(b)
Bank slips duly posted in the Exchange’s bank account and Pay Order(s) shall be delivered to the Exchange within
the prescribed time against the demands in relation to exposure margin/Mark-to-Market losses. However, payments
up to Rs. 2.5 million on bank working days and Rs. 10 million on bank holidays for the purpose of payment against
exposure Margins and losses may be accepted by cheque. Provided that cheque received on bank holidays shall be
credited in the Exchange`s bank account prior to opening of market on the next trading day.
(c)
Exposure Margins deposited by a Broker under these Regulations, pertaining to different markets must be kept
separately by the Exchange. In case of any practical difficulty, margins in respect of different markets, deposited by
a Broker, may be kept on a combined basis; however in case of default of the Broker in a particular market, such
combined margins will be allocated in each market based on exposure of the Broker in that market.
19.5.5. FORM OF MARGIN DEPOSITS:
Margins payable by a Broker under these Regulations will be accepted by the Exchange in the form as specified in
Schedule-III.
19.5.6. CONDITIONS APPLICABLE TO ALL MARGIN DEPOSITS:
All margins deposited by the Brokers with the Exchange pursuant to these Regulations shall be subject to the following
conditions:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
The Exchange may from time to time prescribe, with the prior approval of the Commission, Haircuts applicable to
each Margin Eligible Security;
The Exchange shall not accept any Margin Eligible Security for the purpose of margin requirements if acceptance of
Margin Eligible Security taken together with the margins already held will exceed Broker wide and/or market wide
limits of deposit of such Margin Eligible Security as prescribed in Schedule-IV hereto;
The security is in book entry form;
The issuer of security is not placed on the defaulter’s segment of the Exchange;
The Corporate Brokerage Houses listed on the Exchange will not be allowed to deposit against the Exposure of their
own company’s shares;
The Exchange may from time to time prescribe, with the prior approval of the Commission, the maximum number of
acceptable Margin Eligible Securities;
Any other criterion prescribed by the Exchange and approved by the Commission from time to time;
The Exchange shall give at least 30 days prior notice to the market participants before including or excluding any
security from the list of Margin Eligible Securities;
The Exchange shall carry out in each June and December a review of Margin Eligible Securities on the basis of data
available for preceding six months. Any resulting change in the securities shall be notified one month in advance.
19.5.7. VALUE OF MARGIN DEPOSIT TO BE MAINTAINED:
The Broker depositing margin in the form of Margin Eligible Securities shall always maintain the value thereof, after
application of the relevant Haircuts, at not less than the margin amount for the time being required to be covered by them
by providing further Margin Eligible Securities or depositing cash to the satisfaction of the Exchange which shall always
determine the said value and whose valuation shall conclusively fix the amount of any deficiency to be made up from
time to time. If at any time during a trading day, the required margins against Exposure of a Broker and its clients exceed
the already deposited margins, such Broker shall deposit with the Exchange the margin computed by the Exchange
Trading System within the time specified by the Exchange, but not later than opening of the market on the next trading
day.
19.5.8. PRE-TRADE MARGIN:
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All trades shall be subject to availability of Margins by the Brokers at the pre-trade level (Order entry level) in the manner
as prescribed by the Exchange from time to time from any of the sources mentioned below:
(a)
(b)
(c)
(d)
(e)
House Account of respective Broker;
Sub-Account of respective client;
Bank Guarantee(s) provided by the respective Broker;
Investor Portfolio Securities Account of the respective Broker/client; and
Sub-Accounts of the individuals as authorized under clause 19.8.5. below.
19.5.9. POST TRADE MARGINS:
All trades/transactions shall be subject to collection of Margins at the close of trading day in the relevant market as
provided in Clause 19.8. below. If a Broker has insufficient Margins against Exposure and MtM Losses against his
position on UIN basis at the close of trading day in the relevant market, such Broker shall not take further Exposure for
such UINs in the relevant market on next trading day, however, the Broker may reduce the position of such UINs by
squaring-up open position.
19.5.10. BASIC DEPOSITS AS EXPOSURE MARGINS:
The basic deposits payable for the Ready Delivery Contracts Market, Deliverable Futures Contract Market, Cash-Settled
Futures Market, Stock Index Futures Contract (SIFC) Market, Index Options Market and Futures Trading in Provisionally
Listed Companies Market or any other market as required under Deposits, Fees, Contributions and other Sums
Schedule, deposited by a Broker with the Exchange and return earned on the same may be utilized against exposure
margin of such Broker for the respective market during the trading hours. However, the Broker shall replenish the basic
deposit at the end of the relevant day.
Provided that in case of Broker’s default, its basic deposits submitted with the Exchange for various markets shall be
utilized in accordance with the chapter 21 of these Regulations.
19.6. MARK-TO-MARKET LOSSES:
19.6.1. DETERMINATION OF MTM LOSSES:
MtM Loss (or Profit) shall be calculated on trade to trade basis, separately for each scrip, for each client and for
proprietary open positions of a Broker on the basis of the last executed prices during trading hours on a trading day. The
final determination and collection of MtM Losses at the end of trading day shall be at the Closing Prices as determined by
the Exchange. Provided that the basic exemption permissible to a Broker under the regulations applicable to a particular
Market will be deductible while calculating such MtM Losses of the Broker.
In the case of Index Options Market, MtM Loss shall be calculated for each contract separately as the difference between
the Exercise Price of the Option Contract and the corresponding Daily Settlement Price determined in accordance with
the Regulations governing Index Options Market. All short positions in Call and Put Option Contracts of an Option Writer
and/or Option Seller shall attract Mark-to-Market Loss calculations.
19.6.2. NETTING:
While determining the MtM Losses (or profit) payable by a Broker, netting shall be permissible across trades in different
securities for the same client or across trades in different securities for proprietary trades of a Broker, in the same
settlement date or contract period.
In the case of Index Options Market, when determining the MtM Losses payable by a Broker, netting shall be permitted
between MtM profits and losses of buy and sell positions of an Option Writer and/or Option Seller in the same type of
Option Contract with same Expiration Day and same underlying index for the same client or between Proprietary buy and
sell positions in the same type of Option Contract with same the Expiration Day for the same underlying index. No other
netting of profits and losses arising on positions in the Index Options Market shall be permitted inter-alia including netting
of profits and losses across different markets, across different clients or across Option Contracts/Option Series based on
different Underlying Indices.
Netting shall only be permitted in profits and losses of the same client or Broker’s proprietary position in different SIF
Contracts with different expiries. No other netting of profits and losses arising on positions in SIF Contracts shall be
permitted inter-alia including netting of profits and losses across different markets, across different clients or across
futures contracts based on different indices.
Netting for the Deliverable Futures Contract Market shall be permissible as provided for in the chapter 13 of these KSE
Regulations.
19.6.3. MTM LOSSES DEPOSIT:
Each Broker will pay its MtM Losses to the Exchange at any point in time (as demanded by the Exchange) or at the
end of each trading day but not later than prior to opening of trading on the next day.
(b) MtM losses of Brokers (client as well as proprietary positions) having total Exposures in the Deliverable Futures
Contract Market or Index Options Market of more than Rs.200 million will be collected twice a day, including at the
end of each trading day.
(a)
19.6.4. FORM OF MTM LOSSES DEPOSIT:
Deposit against MtM Losses will be accepted by the Exchange in the form as specified in Schedule-III.
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19.7. OTHER MARGINS:
19.7.1. CONCENTRATION MARGINS:
Concentration Margins shall be payable by a Broker in respect of a security in Deliverable Future Contracts and CashSettled Futures Contracts Markets determined in accordance with Schedule-VII. Concentration Margin shall be
calculated at the end of each trading day.
19.7.2. SPECIAL MARGINS:
Special Margin with respect to Stock Index Futures Contract shall be determined and be payable in accordance with
these KSE Regulations.
19.7.3. LIQUIDITY MARGINS:
The Liquidity Margins shall be payable by a Broker once his Exposure limit in the Ready Market reaches a certain level
at the rate as prescribed in the Schedule-VIII. Such margins shall be payable by the Broker from his Proprietary Account.
19.7.4. ADDITIONAL MARGINS ON LEVERAGED BUYS FINANCED THROUGH MT MARKET:
A Broker shall be required to pay Additional Margins after the close of MT Market to maintain his Margins equivalent to
higher of 25% or VaR Estimate on Leveraged Buy of respective security on that trading day, provided relevant MT
Transaction executed on MT Market based on such Leveraged Buy is communicated to the Exchange by NCCPL.
19.7.5. CONCENTRATION, SPECIAL, LIQUIDITY AND ADDITIONAL MARGINS:
The applicable Concentration, Special, Liquidity and Additional Margins shall be paid by a Broker at the end of each
trading day.
19.7.6. OBLIGATION IN ADDITION TO OTHER MARGINS:
The obligation to pay Concentration, Special, Liquidity and Additional Margins is in addition to the obligations to pay
Exposure Margin and MtM Losses.
19.7.7. FORM OF DEPOSIT AGAINST CONCENTRATION, SPECIAL, LIQUIDITY MARGINS AND ADDITIONAL MARGINS:
Deposit against Concentration, Special, Liquidity and Additional Margins will be accepted by the Exchange in the form as
specified in Schedule-III.
19.8. SOURCE AND UTILIZATION OF MARGINS AND MTM LOSSES:
19.8.1. The required margins and MtM Losses as specified in Schedule-III hereto to be deposited by a Broker in the form of
Margin Eligible Securities in the book entry form shall be acceptable from:
(a)
Subject to Sub-Regulation 19.8.4. and 19.8.5. below, sub-account(s) of a client maintained under participant account
of the Broker against trades/transactions of such client on UIN basis.
Provided where a Broker of another Stock Exchange carries out trades/transactions for its own proprietary account
or on behalf of its clients through the Broker of the Exchange, complying with the process of NCCPL for registering
UIN for Inter-Exchange trades, then the required margins/MtM losses shall be acceptable from the House Account
or respective sub-accounts, as the case may be, of clients of the Broker of another Stock Exchange maintained
under its participant account.
(b)
Subject to Sub-Regulation 19.8.4. below, house account(s) of a Broker against trades/transactions of such Broker
on UIN basis in proprietary account.
19.8.2. Cash deposited by the Broker with the Exchange and segregated towards the respective client (UIN) under the
designated system, shall be utilized towards margin requirements and MtM Losses against trades/transactions of that
client.
19.8.3. Subject to Sub-Regulation 19.8.4. below, Cash and Bank Guarantee(s) deposited by the Broker shall be utilized towards
margin requirements and MtM Losses against the Broker’s proprietary UIN trades/transactions.
19.8.4. The Broker may authorize in writing the Exchange to utilize excess Margin Eligible Securities available in his house
account, cash and Bank Guarantee(s) deposited with the Exchange for meeting any shortfall in the margin and MtM
Losses requirements of his clients. However, Brokers will be required to collect margins from their clients as provided
under these Regulations and separately maintain cash deposited by their clients as margins in their back-office record.
19.8.5. The Directors on the board and Chief Executive of a Corporate Brokerage House irrespective of their holding in such
Brokerage House or any other individual who holds at least 10% shares of the Corporate Brokerage House (referred to
as “Pledgor” in this clause and Schedule- IX) may authorize the Brokerage House in writing through a specific authority
as specified in Schedule-IX of this chapter, specifying the number of shares and time duration, if any, for utilizing excess
Margin Eligible Securities available in their respective sub-account(s) for meeting any shortfall in the margin and MtM
LOSS requirements of other UINs, including proprietary UIN of such Corporate Brokerage House in favor of the
Exchange.
The time duration, if any, for utilizing excess Margin Eligible Securities shall be specified by the Pledgors. After the expiry
of the authorization, the Pledgor may renew the authority on his discretion .
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19.8.6. Upon failure of a Broker to meet his/its obligations in accordance with chapter 21 of these Regulations and/or NCCPL the
collaterals deposited as margins shall be utilized as per those Regulations.
19.9. POSITION LIMITS:
No Broker shall have open positions in client/proprietary trades in any security/contract in a Market of more than the
limits, as specified in Schedule-V hereto. Furthermore, overall Broker-wide as well as Market-wide position limits are also
applicable as specified in Schedule-V hereto.
All position limits shall be monitored by the Exchange through a preventive automated mechanism, whereby trading
activity beyond such prescribed limits shall not be allowed. Provided that in the case of SIF Contracts:
Net long and short positions of the Broker and his clients shall be added for the purpose of calculating Broker level
Open Interest in SIF.
(b) For the purpose of calculating the open interest limits the cumulative open interest in all the SIF Contracts would be
taken into account.
(c) For the purpose of determining Market wide total Open Interest in any SIF Contract, sum of either all net buy
positions or all net sale positions on UIN basis in the SIF Contract shall be considered.
(d) For the purpose of determining broker-level and client level open interest, no netting shall be allowed across
offsetting position in SIF Contract with different expiry date, for calculation of Position Limits.
(a)
19.10. GENERAL:
19.10.1. CIRCUIT BREAKER:
(a)
There shall be a security-wise circuit breaker for each Market separately (except Stock Index Futures Market, Index
Option Market and Odd Lots Market) in case of price fluctuation of 5% or Re. 1/ -, whichever is higher from the
Closing Price of the previous day or any other limit as prescribed by the Exchange, with the prior approval of
the Commission, from time to time. Circuit breakers on the first trading day of a security shall be applicable as
follows:
During the first trading day of a Right Allotment Letter of any security, circuit breakers of 5% or Re. 1/-,
whichever is higher, will be applicable at the notional price determined based on previous day’s Closing
Price of the underlying security minus payable amount against such Right Shares. Provided that when the
amount payable against such Right Shares is equal to or greater than the previous day’s Closing Price of the
underlying security, the notional price will be the tick size of underlying security.
(ii) During the first trading day, on the Ready Delivery Contract Market, of a security formally listed at the
Exchange, circuit breakers of 5% or Rs. 1/-, whichever is higher, will be applicable on the Closing Price
determined on Futures Trading in Provisionally Listed Companies Market.
(iii) Where a security is directly placed on Ready Delivery Contract Market without going through Futures Trading
in Provisionally Listed Companies Market or Book Building Process, then the circuit breaker of Rs.5 or 50%
whichever is higher, shall be applicable on the offer price, during the first trading day in Ready Delivery
Contract Market.
(iv) During the first trading day, on the Ready Delivery Contract Market, of a security formally listed at the
Exchange, circuit breakers of 5% or Rs. 1/-, whichever is higher, will be applicable on the Strike Price of such
security determined through Book Building Process and the Futures Trading in Provisionally Listed Companies
Market of such security shall not be allowed.
(v) If the Security is listed on Futures Trading in Provisionally Listed Companies Market then the circuit breakers
of Rs.5 or 50% whichever is higher, shall be applicable on the offer price during the first trading day in Futures
Trading in Provisionally Listed Companies Markets.
(i)
(b)
In case of Stock Index Futures Market, the related circuit breakers shall be applicable in accordance with
clause 17.2.11. of Regulations Governing Stock Index Futures Contracts of the Exchange, whereas no circuit
breakers shall be applicable on the Index Options Market.
(c)
In case of Odd Lots Market, the circuit breaker of Rs. 2 or 10% of Closing Price of the Ready Delivery Contract
Market shall be applicable.
(d)
Trading will be allowed up to the upper and lower limits as set by the circuit breakers.
(e)
No trade in the respective security will be allowed beyond the above price fluctuation.
19.10.2. DEPOSITS TO BE HELD BY THE EXCHANGE:
All deposits made pursuant to these Regulations and/or NCCPL Regulations shall be held by the Exchange and/or
NCCPL.
19.10.3. LIEN ON DEPOSITS:
The monies, Margin Eligible Securities and other securities and assets deposited by a Broker by way of a margin or
MtM Loss under these Regulations shall be subject to a first and paramount lien for any sum due to the Exchange or to
NCCPL by such Broker and for the due fulfillment of such Broker’s engagements, obligations and liabilities arising out of
or incidental to any trades, dealings, transactions and contracts made subject to the Rules, Bye-laws and Regulations of
the Exchange and NCCPL or anything done in pursuance thereof.
19.10.4. OBLIGATION OF BROKERS TO COLLECT MARGINS FROM THEIR CLIENTS:
Page 159 of 192
Karachi Stock Exchange Regulations
It shall be obligatory upon the Broker trading/taking exposure in any Market under these Regulations to take all margins
and MtM losses from their respective clients in accordance with total Margin Requirements as prescribed by the
Exchange and/or mentioned under the relevant regulations of the relevant regulations of the relevant market, if any.
Such prescribed margin shall be the minimum margins that must be taken by the Broker from their respective clients
while trading/taking exposure on behalf of such client. The Exchange shall ensure compliance of this requirement
through appropriate procedures including auditing and inspection of records, provided that the Brokers may not, if so
desire, collect applicable margins and MtM Losses from their institutional clients who directly settle their trades through
NCCPL as its Non-Broker Clearing Members.
Provided further that in case where margins are not collected from any institutional client, the Broker shall remain
responsible for payment of all applicable margins to Exchange/NCCPL in accordance with these Regulations, including
the requirements of regulation 19.8.
The collection of any type of margin by a Broker from its client/client(s) shall be the sole responsibility of such Broker;
nevertheless any failure of the client to pay such margin shall not affect the obligation of the Broker to pay such margin
to the Exchange/NCCPL.
19.10.5. EVASION OF REQUIREMENTS PROHIBITED:
A Broker shall not directly or indirectly enter into any arrangement or adopt any procedure for the purpose of evading or
assisting in the evasion of the requirements prescribed under these Regulations.
19.10.6. RESTRICTION/PROHIBITION:
The provisions of these Regulations, inter-alia including schedules, policies, procedures, practices and systems based
on thereof, shall be binding on all the Brokers and shall not be amended, altered or modified by the Exchange without
prior written approval of the Commission.
19.10.7. In addition to the Regulations mentioned above, the Exchange may impose any further risk mitigating conditions and
risk management measures to protect the interest of the Exchange as well as to provide comfort to investors both local
and international with the prior written approval of the Commission.
Page 160 of 192
Karachi Stock Exchange Regulations
Schedule-I
[SEE REGULATION 19.3.1.]
BASE MINIMUM CAPITAL TO BE MAINTAINED BY A BROKER
1
2
Transferable TRE Certificate Lien Marked with
Irrevocable Authority in favor of the Exchange in the
manner prescribed;
Shares of the Exchange pledged in favor of the Exchange in
accordance with the rights, obligations and terms and
conditions specified in the letter of pledge as may be
prescribed by the Exchange from time to time, with the prior
approval of the Commission.
AND/OR
AND/OR
Cash and/or Bank Guarantee to be provided/deposited with
the Exchange.
Cash and/or Bank Guarantee to be provided/deposited with the
Exchange.
Notes:
1.
Every Broker shall maintain the required value of Base Minimum Capital in the forms described in 1 and/or 2 above, at all
times, in order to be able to conduct business through the Exchange Trading Systems. The required value of Base
Minimum Capital shall be determined as the sum of the notional value of TRE Certificate and the breakup value of 40%
shares of the Exchange out of total shares of the Exchanges allotted to an Initial Shareholder Provided that;
(a) In case the Base Minimum Capital is maintained in form of shares of the Exchange or transferable TRE Certificate by
a Broker and value of such shares or notional value of TRE Certificate decreases below the required value of Base
Minimum Capital, there will be no revision in the prevailing required value of Base Minimum Capital and such Broker
must immediately deposit additional cash and/or Bank Guarantee to maintain the required value thereof.
(b) In case the Base Minimum Capital is maintained in form of Cash and/or Bank Guarantee by a Broker and the
required value of Base Minimum Capital increases due to an increase in the Break-up value of 40% shares of the
Exchange and/or notional value of transferable TRE Certificate, the Exchange shall announce the revised required
value of Base Minimum Capital and such Broker must immediately deposit additional cash and/or Bank Guarantee to
maintain the required value thereof.
2.
The Exchange shall determine the notional value of TRE Certificate for the purpose of calculation of Base Minimum
Capital, which will be reviewed once in six months and disseminated to the market participants.
3.
The Exchange shall determine the breakup value per share of the Exchange, which will be reviewed every six months
based on audited or reviewed accounts of the Exchange and disseminated to the market participants.
4.
In case of declaration of such Broker as defaulter or cancellation/forfeiture of its TRE Certificate under the applicable
regulations of the Exchange, the Base Minimum Capital shall be utilized by the Exchange in accordance with the
applicable regulations of the Exchange and in terms of the letter of pledge, where applicable.
---------<>---------
Page 161 of 192
Karachi Stock Exchange Regulations
Schedule-II
BROKERS’ NET CAPITAL BALANCE (NCB) LIMIT & LEVERAGE POSITION
BROKERS’
NET
CAPITAL
BALANCE
LIMIT &
LEVERAGE
POSITION
SLB
MARKET
MF
MARKET
MT
MARKET
(AS
FINANCEE)
As
prescribed
by NCCPL
under its
Regulations
As
prescribed
by NCCPL
under its
Regulations
As
prescribed
by NCCPL
under its
Regulations
DELIVERABL
E FUTURES
MARKET
CASH
SETTLED
FUTURE
(CSF)
CONTRACTS
INDEX
OPTIONS
MARKET
STOCK
INDEX
FUTURES
CONTRACTS
(SIFC)
7.5 times of the NCB of a Broker excluding the Capital
Adequacy (Exposure) utilized by such Broker in the MT
Market.
Maximum Exposure of 7.5 times of the NCB of a Broker for Cash
Settled Futures Market, Stock Index Futures Contracts Market, Index
Options Market, Deliverable Futures Contract Market, and MT Market.
Maximum Exposure of 25 times of the NCB of Brokers for All Markets.
---------<>---------
Page 162 of 192
READY
MARKET
25 times
the NCB
of
Broker
Karachi Stock Exchange Regulations
Schedule-III
FORM OF EXPOSURE MARGINS, MTM LOSSES, SPECIAL MARGINS, CONCENTRATION MARGINS, LIQUIDITY
MARGINS AND ADDITIONAL MARGINS DEPOSITS
SR.
NO.
1
MARKET
EXPOSURE MARGINS
MTM
LOSSES
SPECIAL
MARGIN
CONCENTRATION MARGINS
LIQUIDITY
MARGINS
Ready Market
100% in Cash and/or
Margin Eligible
Securities and/or
Bank Guarantee
provided by the
respective Broker
100% in Cash
and /or Margin
Eligible
Securities
and/or Bank
Guarantee
Not
applicable
Not applicable
100% in
Cash
and /or
Margin
Eligible
Securities
and/or
Bank
Guarantee
100% in Cash and/or
Bank Guarantee
100% in Cash
Not
applicable
Not applicable
Not
applicable
50% in Cash and/or
Bank Guarantee and
50% in Margin
Eligible Securities
100% in Cash and/or
Bank Guarantee
100% in Cash
Not
applicable
100% in Cash
and/or Bank
Guarantee
Not
applicable
Not applicable
100% in Cash
Not
applicable
Not
applicable
Not applicable
100% in Cash and/or
Bank Guarantee
100% in Cash
Not
applicable
Not applicable
100% in Cash and/or
Bank Guarantee
100% in Cash
100% in Cash
and/or Bank
Guarantee
Not
applicable
100% in cash
and/or Bank
Guarantee
Not applicable
Not applicable
Not
applicable
Not applicable
*2
Leveraged Buys
financed through
MT Market
3
Futures Trading
in
Provisionally
Listed
Companies
Market
Deliverable
Futures Market
4
5
Cash-Settled
Futures Market
6
Stock Index
Futures
Contracts Market
Index Option
Market
7
ADDITIONAL
MARGINS
Not applicable
100% in Cash
and /or Margin
Eligible
Securities
and/or Bank
Guarantee
provided by
the respective
Broker
Not applicable
Note: 1. In Deliverable Futures Market, in case where Exposure is due to sale of a particular security by a UIN, 50% net-sold
position of such security can be deposited by the same UIN to meet full Exposure Margin requirements.
2. The Exchange shall allow return to Brokers on the cash amount deposited with the Exchange as Exposure Margin, MtM
Losses and other margins, if applicable, at the rate paid by the respective banks opted by the Brokers after retaining 1% as
service charges by the Exchange.
* All Margins and MtM Losses for Leveraged Buys executed through special function key by the Brokers and committed to
be financed through MT Market will be collected by the Exchange as applicable in Ready Market till settlement on T+2.
Subsequent to that FPR, MtM Losses and any other margins on relevant MT Transactions shall be collected by NCCPL
only in cash in accordance with the NCCPL Regulations.
---------<>--------
Page 163 of 192
Karachi Stock Exchange Regulations
Schedule-IV
MARGIN ELIGIBLE SECURITIES
The following limits shall be applied for the maximum number of shares in any eligible scrip that may be deposited by a Broker
for collateral purposes:
VAR BASED MARGIN
PERCENTAGES
MAXIMUM NUMBER OF SHARES IN A SYMBOL THAT
MAY BE DEPOSITED BY A BROKER AS COLLATERAL
VaR ≤ 20%
2% of Free-Float
VaR > 20%
0.5% of Free-Float
A maximum limit per scrip, as a percentage of Free-Float, shall apply to all scrips deposited as security i.e. margin held by the
exchanges cannot exceed 50% of Free-Float of such scrip.
Exchange will notify the market when 70%, 80% and 90% limits in scrip are reached.
---------<>---------
Page 164 of 192
Karachi Stock Exchange Regulations
Schedule-V
POSITION LIMITS
Position
Limit
Market wide
Broker wide
(Broker’s
position
includes its
clients’
positions)
Client wide
(this limit is
also
applicable to
the Broker’s
proprietary
position)
Leveraged
Markets
As
prescribed
by NCCPL
Leveraged
Market
under its
Regulations
Stock Index
Futures
Contracts
based on
per product
(KSE 30/Each
sector
Index)
Not
Applicable
Ready
Market
Contracts
(Position
limit will be
based on
the volume
in a
security)
100% of
Free-Float
Deliverable Futures
Contracts
(Cumulative position
limits based on the
total open interest in
a security across all
derivatives
contracts)
Cash Settled Futures
Contract
(Cumulative position
limits based on the
total open interest in a
security across all
derivatives contracts)
40% of Free-Float for
each security
40% of Free-Float for
each security
10% of the above
mentioned market
wide position limit for
each security.
10% of the above
mentioned market wide
position limit for each
security.
10% of the
total open
interest or
10,000
contracts
(whichever
is higher)
10% of the
total open
interest or
10,000
contracts
(whichever is
higher)
No limit
5% of the above
mentioned market
wide position limit for
each security for a
Broker’s individual
clients. For financial
institutions and mutual
funds clients trading at
the KSE, each such
institution will have a
limit of 5% of the
market wide position
limit mentioned above.
(Client position will be
universal and
determined on UIN
basis)
5% of the above
mentioned market wide
position limit for each
security for a Broker’s
individual clients. For
financial institutions and
mutual funds clients
trading at the KSE, each
such institution will have
a limit of 5% of the
market wide position
limit mentioned above.
(Client position will be
universal and
determined on UIN
basis)
1% of the
total open
interest or
1,000
contracts
(whichever
is higher)
1% of the
total open
interest or
1,000
contracts
(whichever is
higher)
No limit
---------<>---------
Page 165 of 192
Index Option
Market
based on
Contracts
per
underlying
Index
Not
Applicable
Karachi Stock Exchange Regulations
Schedule-VI
PENALTY SCHEDULE OF NON-COMPLIANCE OF NET CAPITAL BALANCE SUBMISSION
NO. OF CALENDAR DAYS UNDER
NON-COMPLIANCE
PENALTY IMPOSED
(RS. PER DAY)
REDUCTION IN NET CAPITAL
BALANCE
From Day 1 to Day 15
2,000
10%
From Day 16 to Day 30
3,000
20%
From Day 31 to Day 45
4,000
40%
From Day 46 to Day 50
5,000
80%
From Day 51 onward
5,000
100%
---------<>---------
Page 166 of 192
Karachi Stock Exchange Regulations
Schedule-VII
CONCENTRATION MARGINS DEPOSITS
CONCENTRATION MARGIN SLABS
%AGE OF DFC/CSF POSITION
TO TOTAL DFC/CSF POSITION
AND
%AGE OF DFC/CSF POSITION TO
FREE-FLOAT OF SCRIP
Concentration Margins
MARKET-WIDE SECURITY CONCENTRATION SLABS AND RATES
Greater than
2
"
Greater than
5.00
1.00
Greater than
6
"
Greater than
7.50
2.00
Greater than
8
"
Greater than
10.00
3.00
Greater than
10
"
Greater than
15.00
4.00
Greater than
12
"
Greater than
25.00
5.00
Greater than
14
"
Greater than
35.00
6.00
BROKER-WIDE SECURITY CONCENTRATION SLABS AND RATES
Greater than
5
"
Greater than
1.00
1.00
Greater than
10
"
Greater than
1.50
2.00
Greater than
20
"
Greater than
2.00
3.00
Greater than
30
"
Greater than
2.50
4.00
Greater than
40
"
Greater than
3.00
5.00
Greater than
60
"
Greater than
3.50
6.00
UIN-WIDE SECURITY CONCENTRATION SLABS AND RATES
Greater than
1
"
Greater than
0.50
0.50
Greater than
2
"
Greater than
0.75
1.00
Greater than
4
"
Greater than
1.00
1.50
Greater than
8
"
Greater than
1.25
2.50
Greater than
16
"
Greater than
1.50
3.50
Note:
All three tier Concentration Margins in DFC and CSF will be applied on ‘AND’ basis and shall be applicable on the
basis of average of the margins corresponding to the two applicable slabs.
---------<>---------
Page 167 of 192
Karachi Stock Exchange Regulations
Schedule-VIII
MARKET LIQUIDITY MARGINS DEPOSITS
EXPOSURE VALUE AS PER NEW REGIME
From
LIQUIDITY MARGINS %
To
0
Rs. 50 million
No
Above Rs. 50 million
Above Rs. 100 million
Rs.100 million
Rs. 150 million
0.50%
1.00%
Above Rs.150 million
Above Rs. 200 million
Rs. 200 million
Rs. 250 million
1.50%
2.00%
Above Rs. 250 million
Above Rs. 300 million
Rs. 300 million
Rs. 350 million
2.75%
4.00%
Above Rs. 350 million
Above Rs. 400 million
Rs. 400 million
Rs. 450 million
5.50%
7.25%
Above Rs.450 million
9.25%
Note: The Liquidity Margin Deposits as calculated above will be charged to proprietary account of the Broker concerned.
---------<>---------
Page 168 of 192
Karachi Stock Exchange Regulations
Schedule-IX
[On non-judicial stamp paper as required under
CDC Standardized Account Opening Form for individuals]
[For individual Sub-Account Holder]
SPECIFIC AUTHORIZATION PURSUANT TO CLAUSE (G) OF THE STANDARDIZED
SUB-ACCOUNT OPENING FORM FOR PLEDGING OF BOOK-ENTRY SECURITIES
This Authorization is executed at Karachi, this ____ day of _______ , _________ and shall be valid up to _______.
Pursuant to Clause (G) of the Standardized Sub-Account Opening Form, I/we the undersigned, maintaining Sub-Account No.
[insert Sub-Account No.] under CDS Participant Account of [insert name of the Participant] having ID No. [insert Participant ID]
hereby give my/our specific authority to the Participant under Section 12 of the Central Depositories Act, 1997 to pledge my/our
Securities represented by Book-entry Securities entered in my/our aforesaid Sub-Account as detailed below only in favour of
the Karachi Stock Exchange Limited FOR THE SPECIFIC PURPOSE OF PROVIDING MARGINS AGAINST OTHER PERSON
OR PERSONS’ TRADING EXPOSURE AND MARK-TO-MARKET LOSSES THROUGH ABOVE SAID PARTICIPANT AS A
BROKER through the Central Depository System to the extent of this transaction only. The Karachi Stock Exchange shall have
the full authority to liquidate these Book-entry Securities kept as margin in any manner at its discretion in the event of nonfulfillment of financial obligations by that person(s) or his/their Broker in accordance with the Regulations of the Exchange:
Details of Book-entry Securities
S. #
Name of Securities
Volume
Time Duration, if any, as
specified by the Pledgor
1.
2.
3.
IN WITNESS WHEREOF I/we have executed this Authorization on the date first above written in the presence of witnesses
named below.
EXECUTED BY THE SUB-ACCOUNT HOLDER(S)
Name & Signature of Sub-Account Holder: ______________________________(CNIC Number)
Name & Signature of Joint Account Holder 1: ____________________________(CNIC Number)
Name & Signature of Joint Account Holder 2: ____________________________(CNIC Number)
Name & Signature of Joint Account Holder 3: ____________________________(CNIC Number)
In the presence of :
WITNESSES:
1.
___________________________
2. ____________________________
Name: __________________________
Name: __________________________
Address: _________________________
Address:_________________________
CNIC #: __________________________
CNIC #:__________________________
Note:
1.
2.
3.
Use of this Authorization in piecemeal is strictly prohibited.
This Authorization shall be signed as per the operating instruction of the Sub-Account in Participant’s records.
This Authorization shall be duly verified by the Company Secretary of the Brokerage House.
---------<>-------Page 169 of 192
Karachi Stock Exchange Regulations
Chapter 20: DISCIPLINARY ACTIONS AGAINST TRE CERTIFICATE HOLDERS REGULATIONS
20.1. SUSPENSION, FORFEITURE OR CANCELLATION OF TRE CERTIFICATE AND IMPOSITION OF FINES AND
PENALTIES:
20.1.1. The Board may, upon recommendations of RAC, by a resolution, suspend, forfeit or cancel TRE Certificate of a TRE
Certificate Holder, where the RAC is of the opinion that such TRE Certificate Holder:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
Is guilty of fraudulent practices;
Has transacted his/its own or his/its constituent’s/client’s business under fictitious names;
In any manner circulates or causes to be circulated, any rumors;
Repeatedly brings before the Exchange a charge, complaint or suit which, in the opinion of the Board, is baseless,
frivolous, vexatious or malicious;
If without the special permission of the Board a TRE Certificate Holder shares his/its brokerage with or carries on
business or makes any deal for or with any TRE Certificate Holder who has been suspended or whose TRE
Certificate has been cancelled or forfeited as the case may be or who has been declared as Defaulter;
Evades or attempts to evade or assists in evading the Margin requirements prescribed in the relevant Regulations of
the Exchange;
Has refused or failed to comply with any resolution or decision of the Board;
Has contravened KSE Regulations, policies or procedures, orders, notices, directions, decisions or rulings of the
Exchange or the Commission;
Is found guilty of dishonorable or disgraceful conduct;
Has made a false declaration in his/its application for transfer/issuance of TRE Certificate to the Exchange or
Commission;
Has been convicted by a court of law for an offence involving fraud, financial or business misconduct/ malpractices
or moral turpitude which renders him/it unfit to be a TRE Certificate Holder of the Exchange;
Has willfully obstructed the business of the Exchange;
Is incapable of performing his/its functions for any reason deemed sufficient in the discretion of the Board, including
but not limited to the failure of its Chief Executive Officer in case of it being a Corporate TRE Certificate Holder or
himself in case of him being an Individual TRE Certificate Holder or any authorized contact person on its behalf to
attend to any notice, hearing or a claim from or by the Exchange for more than 30 days or his prolonged illness
without making an alternate arrangement with the permission of Exchange, his/its financial precariousness,
insolvency of individual TRE Certificate Holder/ Corporate TRE Certificate Holder going into liquidation etc;
Has refused or failed to provide any information as required by the Exchange and/or the Commission.
Provided no such order shall be passed by the Board except after giving the TRE Certificate Holder an opportunity of
being heard. Such hearing may be conducted by the RAC or a sub-committee constituted by the RAC for an order of
suspension and by the Board for an order of cancellation or forfeiture of the TRE Certificate. The RAC or the Board as
the case may be may proceed ex-parte against a TRE Certificate Holder who fails to appear for hearing in two
consecutive hearings.
20.1.2. The Board upon recommendation of CRO may also by resolution, suspend forfeit/cancel TRE Certificate of a TRE
Certificate Holder, where the CRO is of the opinion that such TRE Certificate Holder:
Has failed to pay any fine or penalty imposed upon him/it in accordance with KSE Regulations for the time being in
force;
(b) Has failed to pay any money which may be due by him/it to the Exchange relating to trading, operational, and other
administrative facilities within such time as may be determined by the Board;
(a)
Provided that before the above actions are taken by the Board, the Board may allow thirty (30) days to the TRE
Certificate Holder to pay such money.
(c)
Has failed to submit to or abide by or carry out any award in arbitration passed by the Sole Arbitrator/ Sub Panel of
Arbitrators, Appellate Panel or any other arbitration forum established by the Exchange. Provided that maximum
period of thirty (30) days shall be given to the TRE Certificate Holder for implementation of the award.
20.1.3. The imposition of fine or suspension of a TRE Certificate of a TRE Certificate Holder under the KSE Regulations shall be
without prejudice to the power of the Board to subsequently forfeit/cancel TRE Certificate of such TRE Certificate Holder
in case he/it fails to pay the fine imposed or removes the cause of suspension within stipulated time.
20.1.4. LIABILITIES OF PAST TRE CERTIFICATE HOLDERS:
A TRE Certificate Holder who shall for any reason have ceased to be a TRE Certificate Holder of the Exchange shall
nevertheless remain liable for and shall pay to the Exchange all monies which at the time of his ceasing to be a TRE
Certificate Holder shall have been due by him to the Exchange.
20.2. PROCESS TO BE FOLLOWED FOR TAKING DISCIPLINARY ACTION UNDER REGULATION 20.1.2.:
20.2.1. FAILURE TO PAY DUES:
If a TRE Certificate Holder fails to pay his annual subscription/fee/penalty or any other money which may be due by
him/it to the Exchange within a period allowed under regulation 20.1.2. above after the same has become due, the CRO
shall issue a formal two (2) days demand notice to that TRE Certificate Holder for making the required payment.
Page 170 of 192
Karachi Stock Exchange Regulations
20.2.2. SUSPENSION:
In case a TRE Certificate Holder fails to pay the outstanding amount even after the expiry of two (2) days from the date
of receipt of the notice from the CRO as provided above, the CRO may, subject to the passing of Board resolution as per
Regulation 20.1.2. above through a notice on the notice board of the Exchange, suspend such TRE Certificate Holder
until he/it pays all his dues and until then such TRE Certificate Holder shall remain suspended and debarred from
exercising any of the rights and privileges of a TRE Certificate Holder until the CRO, by a further notice upon the notice
board of the Exchange, revokes his suspension.
20.2.3. FURTHER NOTICE:
If a TRE Certificate Holder does not clear his dues even after his suspension for failure to pay his dues to the Exchange
for a period of two months, the CRO shall issue a further demand notice to that TRE Certificate Holder requesting him to
clear his dues within a period of one month from the date of receipt of the said notice.
20.2.4. CANCELLATION/FORFEITURE OF TRE CERTIFICATE:
If the requisition in such further notice is not complied with the Board may by a Resolution passed by a majority of threefourths of the members of the said Board present at the meeting issue directions for cancellation/forfeiture of the TRE
Certificate of such TRE Certificate Holder. Notice of such Resolution shall be posted forthwith on the Notice Board of the
Exchange.
Provided that in case where a TRE Certificate Holder has a subsisting right to transfer its TRE Certificate and such TRE
Certificate is a component of the Base Minimum Capital maintained by such TRE Certificate Holder under the
Regulations Governing Risk Management, such TRE Certificate will not be cancelled and instead shall be forfeited and
transferred by the Exchange and proceeds shall be utilized under these Regulations. However, all the provisions of these
regulations applicable consequent upon cancellation of TRE Certificate shall remain so applicable on the TRE Certificate
holder considering as if its TRE Certificate has been cancelled.
20.3. INVESTIGATION AND COMPLIANCE POWERS:
20.3.1. Where the Exchange, on the basis of the information available to it, is of the opinion that it is necessary to investigate
into a matter of possible breach of provisions of the KSE Regulations, the RAC shall have all supervisory and
investigatory powers that are necessary for the exercise of its functions. It shall exercise such powers either directly or,
where appropriate, in collaboration with other authorities, including the Commission.
20.3.2. The powers referred to above shall be exercised in conformity with the KSE Regulations and shall include the right to:
Have access to any information in any form whatsoever (whether electronic and/or paper based) and to receive a
copy of same;
(b) Demand information from any TRE Certificate Holder and if necessary, to summon and hear any such TRE
Certificate Holder;
(c) Carry out on-site inspections or engage external consultants/auditor;
(d) Require existing telephone and data traffic records from TRE Certificate Holder.
(a)
20.3.3. In the event of any apparent violation/non-compliance of any of KSE Regulations, the CRO or authorized officer of RAD
may, after giving a notice in writing, suspend operation of all trading terminals of such TRE Certificate Holder, whenever
in its opinion it is necessary to take an emergent action in the best interest of market, subject to its action being
confirmed by the Board in its emergent meeting/through resolution by circulation within next 24 hours. The Board may or
may not ratify such action of the CRO or any authorized officer of RAD and such switching-off of trading terminals shall
not continue for more than seven (7) days. However, in appropriate cases, the Board may hear the concerned TRE
Certificate Holder itself or for this purpose constitute any committee.
20.3.4. In the event of refusal by the Commission to renew Broker registration of a TRE Certificate Holder or failure by the TRE
Certificate Holder to apply for renewal till the date of expiry of the broker registration, or cancellation of registration by the
Commission, the CRO or authorized officer of RAD shall suspend the complete trading terminals of such TRE Certificate
Holder after obtaining confirmation of the Commission.
20.4. HEARING, IMPOSITION OF FINES AND APPEAL PROCEDURES:
20.4.1. Any officer of RAD, not below the level of DGM, authorized in this regard by the CRO, shall have the authority to conduct
a hearing in respect of any violation/ non-compliance by a TRE Certificate Holder of provisions of KSE Regulations in all
the matters where contravention attracts imposition of fine of up to an aggregate amount of Rs. 500,000/-. Upon
completion of the hearing, the RAD shall send its recommendations to the CRO for its approval and final decision.
20.4.2. The sub-committee of the RAC shall have the authority to conduct a hearing in respect of any violation/non-compliance
by a TRE Certificate Holder of provisions of KSE Regulations in all matters where contravention attracts imposition of
fines of above aggregate amount of Rs. 500,000/-.
20.4.3. In case the officer of the RAD conducting a hearing finds during any stage of hearing that the aggregate amount of fine
for apparent violation/non-compliance is likely to exceed the maximum aggregate amount of Rs. 500,000/-, then he shall
cease further proceedings and immediately refer the case to the sub-committee of the RAC.
20.4.4. All cases of violation/non-compliance by a TRE Certificate Holder shall be disposed-off within thirty (30) days of the date
of first hearing by the RAD or the sub-committee of the RAC, as the case may be.
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20.4.5. In case hearing could not be disposed-off within the prescribed time due to unavoidable circumstances or reasons
beyond control, the specific reasons for the delay along with the required time extension shall be communicated in
writing:
(a)
(b)
to the sub-committee of the RAC, in case of delay by the RAD;
to the RAC, in case of delay by the sub-committee of RAC.
20.4.6. An appeal by an aggrieved TRE Certificate Holder against the decision of the CRO made on the recommendations of the
RAD, shall be heard and decided by the sub-committee of RAC. The decision of the sub-committee of the RAC in such
appeal shall be final and binding on the concerned TRE Certificate Holder.
20.4.7. An appeal by an aggrieved TRE Certificate Holder against the decision of the sub-committee of RAC shall be heard and
decided by the RAC itself. The decision of the RAC shall be final and binding on the concerned TRE Certificate Holder.
20.4.8. An appeal filed pursuant to above decisions, shall be disposed-off within forty five (45) days of its filing. However, if such
appeal is not disposed-off within this prescribed time due to unavoidable circumstances or reasons beyond control, the
specific reasons for the delay along with the required time extension shall be communicated in writing to the RAC, in
case of appeal filed with the sub-committee of the RAC, and to the Board in case of appeal filed with the RAC.
Provided that no appeal against the decision of the CRO or sub-committee of the RAC, as the case may be, shall be filed
beyond 14 days of receipt of such decision by the concerned TRE Certificate Holder and any such appeal even if filed
shall not be entertained by the Exchange.
20.4.9. No second (2nd) appeal shall be entertained against the appellate decisions of the sub-committee of RAC or RAC, as
the case may be.
20.4.10. The Exchange will impose fine/appropriate sanctions on the relevant parties when it is established that breaches of
(trading and clearing) regulations have been committed. On minor transgressions, RAD has the powers/discretion to
compound the offence. On serious cases, RAD will initiate disciplinary actions which include reprimanding, imposition of
fine, restricting trading rights, suspension of TRE Certificate, as it deems appropriate. In determining the sanctions, RAD
will take into account the severity of the transgression, the compliance track record of the offender, the impact of the
offence as well as mitigating factors.
If investigations suggest that the law prohibiting market misconduct could have been breached, the matter will be
referred to the SECP for further investigation and action.
20.4.11. Where a TRE Certificate Holder is found to be in non-compliance with any provision of these KSE regulations, and no
specific penalty for such offence has been prescribed in these Regulations, the Exchange may impose a fine upto a
maximum of Rs. 5 million.
20.5. DISCIPLINARY ACTIONS IN RESPECT OF AUDIT ACTIVITIES:
20.5.1. If the audit report identifies any non-compliance(s) including that of the Articles, Regulations, Securities Rules and
directives/notices/circulars/guidelines of the Exchange, Commission, etc., the CRO may, after giving the TRE Certificate
Holder an opportunity of being heard and considering the severity and materiality of the non-compliances, take
appropriate enforcement action including issuing warnings and imposing fines. The CRO may by order, direct the TRE
Certificate Holder to pay a fine amounting to not less than Rs. 10,000/- but not exceeding Rs. 200,000/- per instance of
non-compliance, in addition to the specific Penalty/enforcement action as provided in the relevant law, rules and
regulations.
20.5.2. If a TRE Certificate Holder fails to co-operate with the Auditor, the CRO shall upon receiving a written complaint from the
Auditor, call a hearing of the TRE Certificate Holder and the Auditor and may issue a warning letter or may impose a fine
not exceeding Rs.100,000/- on the said TRE Certificate Holder. If the TRE Certificate Holder, subsequent to the
imposition of the said fine fails to cooperate with the Auditor or fails to pay the fine, the CRO shall refer the matter to
RAC/Board as the case maybe for initiation of disciplinary actions under KSE Regulations.
20.5.3. If any TRE Certificate Holder fails to pay the audit fees and charges within the specified time, the CRO may impose a
Penalty on such TRE Certificate Holder as it may deem fit.
20.5.4. Where the Exchange neglects or otherwise fails to take necessary action against a TRE Certificate Holder, the
Commission may suo-moto or on receiving any complaint after giving due opportunity of hearing to the TRE Certificate
Holder, impose penalties as provided above and take such other necessary action as deemed fit by the Commission.
20.6. DISCIPLINARY ACTIONS IN RESPECT OF PROPRIETARY TRADING ACTIVITIES:
If a TRE Certificate Holder contravenes with any provisions of chapter 7 of KSE Regulations, the CRO may, after giving
him an opportunity of hearing, by order:
(a)
(b)
Direct the TRE Certificate Holder to pay a penalty of up to a maximum of Rs.100,000/- per contravention.
Suspend the TRE Certificate of a TRE Certificate Holder for a period determined by the Board from time to time.
20.7. DISCIPLINARY ACTIONS IN RESPECT OF TRADING SYSTEM ACTIVITIES:
The CRO shall, upon violation or non-compliance of any provision of chapter 8 and chapter 8B:
(a)
Direct the Broker to take necessary action to remedy the breach;
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(b)
(c)
(d)
Broker may be cautioned or reprimanded;
Impose restrictions on, or suspend, or terminate the access to the facilities in Trading System;
Impose penalties at its sole discretion, which may be financial i.e. maximum penalty of Rs.500,000/- and/or which
may include suspension of trading up to a period of three (3) months and on second or third violation suspension of
trading may be extended to 1-2 years.
20.8. DISCIPLINARY ACTIONS IN RESPECT OF MARKET MAKING ACTIVITIES:
20.8.1. The CRO may immediately, restrict or suspend activities of Market Maker or cancel its appointment where a Market
Maker:
Is found involved in activities that are not commensurate with the responsibilities assigned to a Market Maker or are
detrimental to the interest of market and general investors;
(b) Fails to perform its duties as prescribed in Market Making Agreement under chapter 12 dealing with Market Makers
or any other requirement under KSE Regulations;
(c) Fails to renew its agreement on its expiration;
(d) Fails to pay any fine or penalty imposed upon him within the specified time in accordance with these Regulations.
(a)
Provided no such action shall be taken by CRO except after giving the Market Maker an opportunity of being heard.
However, in case where it is necessary in the opinion of CRO to take an emergent action in the best interest of market,
CRO may, after giving a notice in writing, immediately suspend the market making activities of Market Maker. However,
subsequent to such suspension the CRO shall provide the Market Maker with an opportunity of being heard in
accordance with procedures and take appropriate action as provided in KSE Regulations.
20.8.2. In case of suspension, default of a TRE Certificate Holder or cancellation of TRE Certificate of TRE Certificate Holder
being appointed as a Market Maker, the CRO shall immediately restrict the Market Maker to perform its market making
activities.
Provided that the CRO shall notify the AMC if Market Maker was appointed by such AMC for ETF prior to taking any
action under these Regulations.
20.8.3. In case of exceptional circumstances affecting the market, which result in significant order imbalance, the CRO may, on
the request of the Market Maker, allow suspension of market making activities in the Designated Products for the
requested period.
20.8.4. If appointment of Market Maker is restricted, suspended or cancelled for any reason in accordance with KSE Regulations
or Market Making Agreement, then the suspended/ terminated Market Maker may carry out all other trading activities of a
TRE Certificate Holder as a Broker.
20.8.5. The Exchange shall disseminate to the market as soon as possible the information relating to imposition of restriction,
suspension or cancellation of appointment of Market Maker through the Public Address System of the Exchange. All
such information shall also be made available to general public through the Exchange’s Website.
20.8.6. CRO may impose financial penalty on the Market Maker up to the amount of transaction fee refunded to such Market
Maker during the last six months or any additional penalty up to a maximum of Rs.100,000/-.
20.8.7. All the above mentioned actions of suspension/restriction and/or imposition of financial penalty on TRE Certificate
Holders, by the CRO, shall be ratified by the RAC within 48 hours to give effect to the decision.
20.9. DISCIPLINARY ACTIONS IN RESPECT OF SHORT/BLANK SELLING ACTIVITIES:
20.9.1. In case of non-compliance of the chapter 10 dealing with Ready Delivery Contract and chapter 13 dealing with
Deliverable Futures Contract under KSE Regulations by a TRE Certificate Holder on his proprietary account or an
individual or corporate/institutional investor on UIN basis, penalties shall be imposed on each instance of Short/Blank
Sale as follows:
(a)
First violation:
(i)
(ii)
(b)
Second violation within one year of first violation:
(i)
(ii)
(c)
5% of the value of Short/Blank Sale or Rs. 50,000/- whichever is higher, plus confiscation of profits made on
Short/Blank Sale.
In case of non-compliance in proprietary account, 10% of the value of Short/Blank Sale or Rs.100,000/whichever is higher, confiscation of profits made on Short/Blank Sale and switching off all terminals, except one,
to restrict right to trade, up to a maximum period of 03 days.
10% of the value of Short/Blank Sale or Rs.100,000/- whichever is higher, plus confiscation of profits made on
Short/Blank Sale.
In case of non-compliance in proprietary account, 20% of the value of Short/Blank Sale or Rs. 200,000/whichever is higher, plus confiscation of profits made on Short/Blank Sale and switching off all terminals, except
one, to restrict right to trade, up to a maximum period of 07 days.
Subsequent violation:
For each subsequent violation after second violation within one year of first violation, the amount of penalty shall be twice
the amount of last imposed penalty, plus confiscation of profits made on Short/Blank Sale, plus, in case of non-
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compliance in proprietary account, switching off all terminals, except one, to restrict right to trade, up to a maximum
period of 07 days.
20.10. CONSEQUENCES OF TRE CERTIFICATE HOLDER’S SUSPENSION / CANCELLATION/FORFEITURE OF TRE
CERTIFICATE:
20.10.1. A suspended TRE Certificate Holder, during the terms of his suspension, will not exercise or enjoy any of the rights or
privileges of TRE Certificate.
20.10.2. The suspension or cancellation/forfeiture of a TRE Certificate shall not affect the right of creditors against such TRE
Certificate Holder.
20.10.3. The Exchange shall, as soon as possible, notify together with cause of such suspension/cancellation/ forfeiture to the
TRE Certificate Holders and the public through placement on its website any decision of suspension or
cancellation/forfeiture of a TRE Certificate. Further, in case of cancellation/forfeiture of TRE Certificate, Exchange shall
publish such notice in at least two widely circulated newspapers.
20.10.4. A TRE Certificate Holder shall not, without the special permission of the Board, carry on business for or with an individual
TRE Certificate Holder or in case of Corporate Brokerage House, its Nominee Director/Chief Executive and other
directors (holding 20% or more of its shares) who has been suspended or whose TRE Certificate has been
cancelled/forfeited by the Exchange.
20.10.5. When a TRE Certificate is cancelled/forfeited, all the rights and privileges of concerned TRE Certificate Holder shall
stand withdrawn but any liability of any such TRE Certificate Holder to the Exchange or to any other TRE Certificate
Holder of the Exchange shall continue and remain unaffected by cancellation.
20.10.6. Upon cancellation/forfeiture of a TRE Certificate, the Exchange may utilize the following assets of TRE Certificate Holder
for the purpose of discharging such TRE Certificate Holder’s obligations related to transactions and dealings made
subject to any KSE Regulations or NCCPL towards NCCPL, other TRE Certificate Holders and investors:
(a)
(b)
(c)
(d)
All monies, securities and other assets due or deliverable to the TRE Certificate Holder by any other TRE Certificate
Holder of the Exchange or NCCPL in respect of transactions or dealings made subject to any Regulations of the
Exchange or NCCPL;
Securities and deposits, if any, held in the custody of the Exchange;
Securities and/or cash/bank guarantee, if any, held in the custody of NCCPL; and
Base Minimum Capital maintained with the Exchange in accordance with the Regulations Governing Risk Management
of the Exchange.
Provided that in case where a TRE Certificate Holder has a subsisting right to transfer its TRE Certificate and such TRE
Certificate is a component of the Base Minimum Capital maintained by such TRE Certificate Holder under the
Regulations Governing Risk Management such TRE Certificate will not be cancelled and instead shall be forfeited and
transferred by the Exchange and proceeds shall be utilized under these Regulations. However, all the provisions of these
regulations applicable consequent upon cancellation of TRE Certificate shall remain so applicable on the TRE Certificate
Holder considering as if its TRE Certificate has been cancelled.
20.10.7. No TRE Certificate Holder shall, without special permission of the Board, take into or continue in his employment
in any capacity in any business carried on by him, a former TRE Certificate Holder whose TRE Certificate has been
suspended, cancelled or forfeited.
20.11. DISPOSAL OF ASSETS COMPRISING BASE MINIMUM CAPITAL AND PROCEEDS OF SHARES OF EXCHANGE
HELD IN THE BLOCKED ACCOUNT THEREOF:
20.11.1. The assets comprising Base Minimum Capital and proceeds of shares held in the blocked account, shall be free of all
rights, claims or interest of such TRE Certificate Holder or anyone else and the Exchange shall be entitled to deal with or
dispose of such assets in such manner and at such price, as the Exchange may consider fit. If the Exchange disposesoff the assets, the sale proceeds thereof shall in the first place be applied for satisfying the liabilities of the TRE
Certificate Holder, to other TRE Certificate Holders in respect of any contract made subject to the Regulations of the
Exchange and the balance thereof shall be utilized for satisfying the investors claims against the TRE Certificate Holder.
20.11.2. In case the Investors’ claims admitted by the Exchange against a TRE Certificate Holder, in accordance with the
procedures specified by the Exchange from time to time, are more than the balance amount left unutilized out of the
amount realized from Base Minimum Capital and proceeds of shares held in the blocked account for satisfying such
claims, all the claims will be satisfied on pro-rata basis. The claims still remaining unsatisfied after pro-rata sharing will
then be paid from the IPF in accordance with chapter 24 of KSE Regulations.
20.11.3. Notwithstanding anything contained hereinabove, in cases of cancellation/forfeiture of TRE Certificate of a TRE
Certificate Holder, the Exchange may, where amount realized from Base Minimum Capital and proceeds of shares held
in the blocked account, subject to compliance with the applicable laws are not immediately available, for any reason
whatsoever, in the interest of the investors allow settlement of Investors’ admitted claims first from the IPF to the extent
of the maximum permitted amount provided under chapter 24 of KSE Regulations. However, in the event the amount
realized from Base Minimum Capital become available subsequently, then after satisfaction of all claims as provided for
in sub-clause (a) above, any amount remaining unutilized out of the amount realized from Base Minimum Capital, shall
be deposited in the IPF.
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20.12. VERIFICATION OF INVESTORS’ CLAIMS, INSPECTION OF BOOKS & RECORDS AND CONDUCTING OF
ENQUIRY:
The Exchange may verify genuineness of investors’ claims against a TRE Certificate Holder and may inspect books and
records of any TRE Certificate Holder and/or conduct enquiry into his/its dealings and business affairs for verification of
investor’s claims and/or for checking compliance with the Regulations and for this purpose may also appoint an auditor
selected from the panel of auditors prescribed by the Exchange under chapter 23 captioned “System Audit (Regulatory
Compliance)” of the KSE Regulations.
20.13. RESTORATION OF TRE CERTIFICATE:
The Board may, by passing a resolution in this regard, restore TRE Certificate of any TRE Certificate Holder whose TRE
Certificate may have been cancelled/forfeited, if such TRE Certificate Holder submits an application within one year of
cancellation/forfeiture of his/its TRE Certificate and proves to the satisfaction of the Board the removal of cause of
cancellation/forfeiture of TRE Certificate.
Provided that a TRE Certificate Holder shall only be restored if:
(a)
(b)
(c)
in the case of forfeiture , the TRE Certificate has not yet been disposed-off by the Exchange;
All the investor complaints, lodged with Exchange and the Commission against such TRE Certificate Holder, are
settled/withdrawn. However, Exchange shall also obtain prior written consent from all complainants with regard to their
settlements/withdrawals;
Prior written confirmation of the Commission is obtained to confirm the 20.13.(a) above.
The Board shall not restore a TRE Certificate cancelled/forfeited on violation/non-compliance of regulation 20.1.1.(a), (b),
(i) and (k) above.
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Chapter 21: DEFAULT MANAGEMENT IN RESPECT OF TRE CERTIFICATE HOLDERS / BROKERS
REGULATIONS
21.1. DEFINITIONS:
In this chapter, the following expressions shall, unless the context requires otherwise, have the meanings herein
specified below:
“Default Management Committee” shall mean a committee of such name established under the NCCPL Regulations;
“Default Committee” shall mean a committee constituted by the RAC from time to time in line with the plan for
segregation of commercial and regulatory functions of the Exchange approved by SECP;
(c) “Defaulter” shall mean a TRE Certificate Holder declared as a defaulter by the Board in accordance with these
Regulations;
(d) “NCCPL Final Notice” shall mean a notice issued to a suspended TRE Certificate Holder by NCCPL pursuant to
NCCPL Regulations requiring the suspended Clearing Member to pay his final liabilities as determined by the
Default Management Committee.
(a)
(b)
21.2. SUSPENSION ON ACCOUNT OF SETTLEMENT FAILURE OR FAILURE TO PAY OTHER AMOUNTS:
In case a Broker fails to pay any amount payable by him or fails to deliver securities to the Exchange or to other
Broker(s) as directed by the Exchange in accordance with these KSE Regulations, the Exchange shall issue a notice
requiring such Broker to rectify the default within 30 minutes. On failure to comply with the notice by the Broker
within the time allowed, the trading rights of such Broker shall be restricted or suspended by the Exchange by
issuing a notice in writing, a copy of which shall also be delivered to NCCPL and CDC.
(b) Upon receiving of a notice from the Exchange under 21.2.1.(a). above, the NCCPL shall also restrict or suspend
such TRE Certificate Holder’s access to the services offered by NCCPL under its relevant regulations.
21.2.1. (a)
21.2.2. In case a Broker is suspended by NCCPL as its Clearing Member in accordance with NCCPL Regulations and:
if the suspension notice from NCCPL is received after the trading hours of the Exchange, the Exchange shall
immediately suspend such Broker; and
(b) if such suspension notice is received during the trading hours of the Exchange, the Exchange shall immediately
restrict such Broker’s access to all Trading System terminals in a manner that such Broker is not able to take any
further exposure in any of the Markets during the remaining trading hours on that day, provided that one or more
Trading System terminals of such Broker may be operated under the supervision of the Exchange for the purpose of
reducing his exposure. The Exchange shall suspend such Broker after the end of the trading hours on that day.
(a)
21.2.3. In addition to suspension of such Broker, the Exchange shall also transfer on the same day upon demand of NCCPL the
following collaterals provided by the suspended Broker in the relevant Market to meet his settlement obligations towards
NCCPL:
Cash Margins, if any, deposited by such Broker with the Exchange;
Securities, if any, pledged/deposited by such Broker to meet failure of delivery obligations in the priority given in
clause 21.3.3.; and
(c) Proceeds of Bank Guarantee(s), if any, provided by such Broker against respective market.
(a)
(b)
21.3. CLOSING OUT OF UNSETTLED AND OPEN POSITIONS:
21.3.1. Upon suspension of a Broker, the matter shall be referred to the Default Management Committee. The Exchange shall
provide all data and information relating to the unsettled and open positions of the suspended Broker in All Markets,
trades, contracts and transactions, which are not available with NCCPL, to the Default Management Committee along
with the market-wise details of Margins Eligible Securities deposited by the suspended Broker in accordance with
chapter 19 of these KSE Regulations.
Provided that all types of margins held by the Exchange and NCCPL with respect to each of the markets shall be applied
exclusively to settle the claims against that market only by the Exchange and NCCPL respectively. Any surplus may be
shared equally amongst the markets other than such market in proportion to the losses.
21.3.2. The suspended Broker’s unsettled and open positions in all markets (together with his unsettled and open positions
reported by NCCPL) shall be closed-out and squared up in the manner specified by the Default Management Committee
and final liability of the suspended Broker shall be determined by the Default Management Committee.
21.3.3. SQUARING-UP/SELL-OUT OF MARGIN ELIGIBLE SECURITIES BY THE DEFAULT MANAGEMENT COMMITTEE
PROCESS:
The Default Management Committee may square-up or sell out Margin Eligible Securities in the manner specified
below for determining final loss, if any, of the suspended Broker.
(b) Upon suspension of a Broker due to his failure to meet obligations either on his proprietary account or on account of
his clients, the collaterals held by the Exchange shall be dealt with in the following manner:
(a)
(i)
The collaterals in the form of Margin Eligible Securities and/or Cash/Bank Guarantee deposited by the Broker
and/or pledged book-entry securities under Clause 19.8.5 of KSE Regulations shall be retained by the
Exchange against all trades executed through such brokerage house and held by the Exchange with respect to
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each of the markets and shall be subjected to and applied exclusively in accordance with these Regulations of
the Exchange and relevant NCCPL regulations. These margins shall remain available to the Exchange till the
satisfaction of all money and/or delivery obligation and/or any other obligation ascertained after squaring-up
and/or closing out of the brokerages house`s positions (including proprietary position and/or clients` positions)
as provided in these Regulations of the Exchange and relevant NCCPL regulations. In such case of liquidation
of collaterals as margins on UIN basis, such Broker or sub-account holders who have provided authority under
clause 19.8.5. of KSE Regulations, as the case may be, shall have no claims whatsoever against the Exchange
and/or NCCPL
(ii) The collaterals derived by the Exchange from the respective sub-accounts of clients of a TRE Certificate Holder
and/or from the Broker of another Stock Exchange as client of such Broker (deposited by the Broker in
accordance with the chapter 19 of these KSE Regulations shall be retained and utilized by the Exchange to the
extent of margin requirement against their trades/transactions and relevant Mark-to-Market losses on UIN basis,
whereby such collaterals will remain available to the Exchange till the satisfaction of all money and/or charges
related to the trading of such client, ascertained after squaring-up and/or closing out of the concerned Broker’s
position. In such case of liquidation of collaterals as margin on UIN basis, such clients shall have no claims
whatsoever against the Exchange and/or NCCPL. No collateral shall be so utilized in excess of the margin
requirements against the trades/transactions of that client and the respective Mark-to-Market losses.
For the purpose of delivering Margin Eligible Securities squared-up or sold out by the Default Management
Committee, the Exchange will be authorized to execute pledge call on Margin Eligible Securities pledged by the
suspended Broker in accordance with CDC Regulations dealing with pledge transactions.
(d) While disposing of the collaterals, in the form of Margin Eligible Securities, cash and/or bank guarantee, of clients of
a Broker kept as margin, the Exchange shall have the absolute discretion to liquidate such collaterals in preference
to others to meet the obligations of Exchange/NCCPL.
(c)
21.3.4. Upon receipt of copy of NCCPL Final Notice, the Exchange shall serve a final notice to the suspended TRE Certificate
Holder calling upon the suspended TRE Certificate Holder to pay the liabilities stated in the NCCPL notice within the time
allowed in said notice.
21.4. DECLARATION AS DEFAULTER:
21.4.1. Upon receipt of a notice from NCCPL declaring the suspended Broker as defaulter under NCCPL Regulations, such
Broker shall be declared Defaulter by the Board under relevant regulations of the Exchange.
21.4.2. An individual TRE Certificate Holder who has been adjudicated as insolvent and in case of Corporate TRE Certificate
Holder against whom a winding-up order has been passed by the Court for failure to discharge its obligations towards
creditors or a resolution for creditors’ voluntary winding-up has been passed or a resolution for members’ voluntary
winding up has been passed without obtaining prior consent of the Exchange, shall ipso facto be declared as defaulter.
21.5. CONSEQUENCES OF DEFAULT:
When a Broker has been declared as Defaulter by the Board, the Exchange shall at once forfeit/ cancel his TRE
Certificate and such Broker shall cease to be a TRE Certificate Holder of the Exchange. All the assets in of such Brokers
under the control of the Exchange including his Base Minimum Capital shall be utilized in accordance with the
requirements of this chapter.
21.6. FUNCTIONS OF THE DEFAULT COMMITTEE:
The Default Committee of the Exchange shall manage and supervise, in accordance with these regulations, all
proceedings relating to the collection and realization of the assets of a Defaulter in accordance with these Regulations
21.6.1. DEFAULTERS’ ASSETS:
The Default Committee shall recover all monies, securities and other assets due or deliverable to the Defaulter by any
other TRE Certificate Holder in respect of any transactions or dealing made subject to any Regulations of the Exchange
or NCCPL and such assets shall, if not contrary to the provisions of any law for the time being in force, vest with the
Exchange for utilization in accordance with these Regulations. Without prejudice to the generality of the foregoing the
assets of a Defaulter shall include:
Securities, if any, held in the custody of the Exchange after their squaring-up or selling out under regulation 21.3.2.
above or recovered by the Default Committee as stated in above paragraph;
(b) Cash/bank guarantee, if any, remaining unutilized by NCCPL after squaring-up initiated before determination of
NCCPL Final notice and any other assets under the control and custody of Exchange as may be determined by the
Default Committee;
(c) Office(s) within the Exchange premises, if any, in the control of the Exchange; and
(d) Base Minimum Capital maintained with the Exchange in accordance with the chapter 19 of these KSE Regulations
and the proceeds of 0.3% shares of the Exchanges held in the blocked account where applicable subject to
compliance with the applicable law.
(a)
21.6.2. CLAIMS AGAINST DEFAULTER:
(a)
The Default Committee shall invite claims relating to Defaulter’s obligations other than those which are already
included in the closing out process pursuant to Regulation 21.3. above from all TRE Certificate Holders of the
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Exchange and the investors against the Defaulter within a timeframe as may be determined by the Committee for
this purpose.
(b) The Default Committee may not entertain any claim against the Defaulter which is not forwarded within the
prescribed time limit. This time limit shall not be less than 30 days.
(c) The Default Committee shall also not entertain any claim against the Defaulter which does not arise out of any
contract made between a claimant and such Defaulter subject to the Regulations of the Exchange or NCCPL.
(d) The Default Committee shall verify each claim to ascertain the genuineness of each claim and for such purpose may
seek advice or employ the services of an independent expert.
21.6.3. FALSE OR FICTITIOUS CLAIMS:
The Board on the recommendation of Default Committee, may impose fine, suspend, cancel or forfeit the TRE Certificate
of a TRE Certificate Holder when it is proved that any claim filed by such TRE Certificate Holder against the Defaulter
was false or fictitious.
21.6.4. ACCOUNTS OF THE DEFAULTER:
The Default Committee shall keep a separate account in respect of all money, securities or other assets payable or
deliverable to a Defaulter by other TRE Certificate Holders or NCCPL and which are received by them and shall defray
there from all costs, charges and expenses incurred in or about the collection of such assets or in or about any
proceedings taken by them in connection with the default.
21.6.5. DISPOSAL OF THE DEFAULTER’S ASSETS:
All assets of the Defaulter recovered or received by the Default Committee shall be disposed-off by the Default
Committee.
21.6.6. APPLICATION OF THE PROCEEDS:
Proceeds of the Defaulter’s assets realized by the Default Committee other than those mentioned in regulations
21.6.1.(c) and (d) above shall be utilized towards payment of the amount specified in the NCCPL Final Notice. Any
surplus together with the funds recovered from the sale of assets mentioned in regulation 21.6.1.(c) and (d) above shall
be utilized to settle claims admitted by the Default Committee as provided in Regulation 21.8 below.
In case where Proceeds of the Defaulter’s assets realized by the Default Committee other than those mentioned in
regulation 21.6.1.(c) and (d) above are not sufficient for payment of amount specified in NCCPL Final notice then the
contribution mentioned in Regulation 21.7.(a). below shall be utilized. Any surplus remaining out of contribution from
CHPF shall be deposited in the CHPF and the funds recovered from the sale of assets mentioned in 21.6.1.(c) and (d)
above shall be utilized in accordance with regulation 21.8. below.
In case where the funds recovered from the sale of assets mentioned above and the contribution from the CHPF are not
sufficient to satisfy the NCCPL Final notice then the funds mentioned in regulation 21.6.1.(c) and (d) above shall be
utilized. Any surplus shall be utilized in accordance with the Regulation 21.8. below.
21.7. CONTRIBUTION FROM CLEARING HOUSE PROTECTION FUND AND INVESTORS’ PROTECTION FUND:
In the event the funds recovered through the sale of assets of the Defaulter and remaining after application in the manner
mentioned in Regulation 21.6.6. above are not sufficient to satisfy NCCPL Final notice and all claims admitted by the
Default Committee, then the following contributions shall be made available:
From CHPFT for satisfaction of NCCPL Final notice and claims of TRE Certificate Holders in accordance with the
provisions prescribed in the relevant Trust Deed of the CHPFT on recommendation by the Board; and
(b) From Investors’ Protection Fund for satisfaction of claims of investors in accordance with the provisions prescribed
under the relevant trust deed of the fund and Investors’ Protection Fund Regulations.
(a)
21.8. SETTLEMENT OF CLAIMS:
21.8.1. Any surplus fund left after application in accordance with Regulation 21.6.6. above, including any unutilized amount of
funds recovered from the sale of assets mentioned in regulation 21.6.1.(c) and (d) above, shall be distributed in the
following priority:
Brokers other claims as per Regulations of the Exchange and verified by the Default Committee pursuant to
Regulation 21.6.2.
(b) Investors claims as per Regulations of the Exchange.
(a)
Provided in case the investors’ claims admitted by the Exchange against a Broker are more than the amount of
surplus as mentioned in this Regulation, all the claims will be satisfied on pro-rata basis. The claims still remaining
unsatisfied after pro-rata sharing will then be paid from the Investors Protection Fund in accordance with the chapter
24 of these KSE Regulations.
21.8.2. Any surplus funds/assets available after satisfying claims in the above manner shall be deposited in the CHPFT and
Investors Protection Fund in proportion to contributions received from the said funds.
Provided where the amount of Base Minimum Capital and the proceeds of shares of Exchange held in the Blocked
Account is not immediately available and contribution from CHPFT and Investors Protection Fund is utilized first, prior to
the sale of assets comprising Base Minimum Capital and proceeds of shares of Exchange held in Blocked Account, for
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Karachi Stock Exchange Regulations
satisfaction of claims admitted by the Exchange, any amount remaining unutilized out of the sale proceeds of the
defaulter/non-compliant TRE Certificate Holder’s assets, shall be deposited in the manner specified above after
settlement of all claims as stated in Regulation 21.6.6. and 21.8.1. above.
Provided further that the proceeds of the shares of the Exchange constituting the Base Minimum Capital and the shares
of the Exchange held in Blocked Account of a Defaulter shall only be utilized towards payment of the amount specified
in the NCCPL Final Notice, satisfying Investor claims in accordance with these Regulations and any surplus shall be
deposited in the CHPFT and IPF in proportion to contributions received from the said funds or on pro-rata basis where
no such contribution has been received.
21.9. ALLOCATION OF LOSSES:
21.9.1. In case the amount specified in NCCPL Final Notice remains unsettled after utilizing the proceeds of Defaulter’s assets
and the contribution made in accordance with Regulation 21.7. above, the remaining amount shall be allocated and
recovered by NCCPL from the Broker Clearing Member and Non-Broker Clearing Members admitted into NCSS by
NCCPL in accordance with NCCPL Regulations.
21.9.2. The payments by the Broker Clearing Member and Non-Broker Clearing Members admitted into NCSS under Regulation
19.1. above will be treated as claims of such Broker Clearing Member and Non-Broker Clearing Members against the
Defaulter and, if the default was caused on account of a default by any client(s) of such Defaulter, against such client(s).
21.10. BUSINESS WITH DEFAULTER FORBIDDEN:
Except with the prior permission of the Board, no Broker shall carry on business for or with an entity where such entity or
its directors/sponsors/substantial shareholders have been declared a Defaulter by the Exchange and notice regarding
such prohibition has been issued by the Exchange.
Explanation: for the purpose of this chapter, the term “substantial shareholder” shall mean a shareholder holding more
than 10% shares of a brokerage house”.
21.11. RE-ADMISSION OF A DEFAULTER:
21.11.1. If a Defaulter has paid his entire unpaid obligations to Exchange, NCCPL, TRE Certificate Holders, Non-Broker Clearing
Members admitted into NCSS by NCCPL and Investors and has reimbursed the amount utilized from any of the funds
established or maintained by the Exchange or NCCPL, the Board may upon recommendations of RAC subject to such
conditions as they think fit re-admit a Defaulter, if in opinion of the Board such Defaulter:
(a)
(b)
(c)
had defaulted owing to the default of his clients whom he might reasonably have expected to be good for their
commitments.
had not been guilty of bad faith or breach of any Regulations of the Exchange.
had kept his operation within a reasonable proportion of his means or resources.
Provided that in the case of forfeiture, the TRE Certificate of such Defaulter has not yet been disposed-off by the
Exchange.
21.11.2. A Defaulter shall not be re-admitted if his default had been contributed to by reckless dealings on his own account or his
conduct had been marked by indiscretion and by the absence of reasonable caution and/or not in accordance with the
Regulations of the Exchange and or NCCPL.
21.11.3. A TRE Certificate Holder who as an insolvent has been declared a Defaulter shall not be eligible for re-admission until he
has paid in full all claims and dues against him and has been discharged as an insolvent by a court of competent
jurisdiction.
21.11.4. A notice of every application by a Defaulter for re-admission shall be posted on the notice board of the Exchange for at
least fifteen days previous to his re-admission decision.
21.11.5. Any TRE Certificate Holder or any other creditor intending to object to the re-admission of the Defaulter shall
communicate the grounds of his objection to the Board by a letter within fifteen days of the date of posting of the notice of
the application for re-admission. All such objections shall be deemed privileged and confidential.
21.12. CONFLICT RESOLUTION:
In case of any conflict in the matters prescribed in these regulations of the Exchange and NCCPL Regulations dealing
with default management of defaulter Broker Clearing Member who is admitted into NCSS as Clearing Member by
NCCPL, it shall be resolved by Commission in consultation with Chief Executive Officers of the Exchange and NCCPL.
21.13. OVERRIDING EFFECT:
In case of any conflict or inconsistency between these Regulations and any other existing regulations of Exchange, these
regulations shall prevail to the extent of such conflict or inconsistency.
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Karachi Stock Exchange Regulations
Chapter 22:
BROKERS’ OFFICE/BRANCH OFFICE REGULATIONS
22.1. DEFINITIONS:
In this chapter, unless there is anything repugnant in the subject or context:
(a)
“Broker’s Main Office” shall mean an office where a registered individual Broker or the Nominee Director of a
Corporate Broker supervises the said office himself, provided the number of such offices shall not exceed one at a
time.
(b)
“Office(s) or Branch Office(s)” shall mean an Office/Branch/Shop opened and maintained by a Broker within or
outside the premises of the Exchange for conducting the business and trading of securities and includes Broker’s
Main Office but excludes the Broker’s Telephone Booth.
Provided that the operation of Trading Systems Terminal, a terminal linked with the CDS in the capacity of CDC
Participant, and/ or computer connected with the NCSS in the capacity of a Clearing Member within or outside KSE
Building shall also be treated as Office(s)/Branch Office(s) for the purpose of these Regulations.
Provided further that in case where a Broker has only one location of operation and does not have an Office/Branch
Office at an alternate/second location, he/she shall mandatorily be required to install one Remote Disaster Recovery
(DR) Terminal in accordance with the Trading Systems Regulations of the Exchange, and may be installed at any
place which shall not deemed to be Office/Branch Office under these Regulations.
(c)
(d)
“Head Office” shall mean a Broker’s Office/Branch Office designated as the principal place of business.
“Manager” shall mean a person appointed by the Broker to operate and supervise the Office/Branch Office in
accordance with the Rules and Regulations of the Exchange and who is registered with the Commission as Agent
under the Brokers and Agents Registration Rules, 2001.
Provided that an individual Broker or Nominee Director of a Corporate Broker shall be deemed to be the Manager of
the Broker’s Main Office.
(e)
“Broker’s Telephone Booth(s)” shall mean the space within the Trading Hall of the Exchange where additional
Trading Systems Terminals and telephones are provided to the Brokers and it shall be deemed to be a part of the
Broker’s Main Office.
(f)
“Certificate” shall mean a Certificate of Registration of the Office/Branch Office issued by the Exchange.
22.2. PROCEDURE FOR OPENING OF OFFICE/BRANCH OFFICE:
A Broker may open his/its Office(s)/Branch Office(s) within and outside the premises of the Exchange for conducting
business and trading of securities in accordance with these Regulations as well as the law applicable in this behalf
subject to prior approval of the Exchange in writing and completion of the following formalities:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
An application on the prescribed form (Annexure-A);
An undertaking on prescribed form (Annexure-B);
Annual payment of Registration/Renewal fee per office/per branch as prescribed by the Exchange from time to time;
Documents evidencing the ownership of the Office or Branch Office and/or Agreement with landlord of the office, if
that office is not owned by the Broker;
Name of Manager along with residential address, CNIC, his bio-data, two latest photographs, and his specimen
signature and in case of Office/Branch Office other than Broker’s Main Office the Certificate of Registration as
Agent;
Specimen signature(s) of the persons authorized to deal with clients;
Branch-wise list of employees, along with their CNIC and residential addresses and the same information shall be
provided to the Exchange on quarterly basis;
Office(s) or Branch Office(s) must only be operated under the name of the Broker who has opened and maintains
such Office(s)/Branch Office(s);
List of authorized signatories to the bank accounts if maintained separately by that Office/Branch Office and the
same information shall be provided to the Exchange on quarterly basis;
The Broker shall submit the details of all Trading Systems terminals operational at all the Office(s)/Branch Office(s);
All the dealings at the office(s)/Branch Office(s)/Shop(s) shall be subject to these Regulations;
The Broker shall be fully responsible for all the dealings, acts of agents/employees in accordance with these
Regulations, Securities and Exchange Ordinance, 1969 and Securities and Exchange Rules, 1971 and shall be
liable thereof;
Status of Office(s)/Branch Office(s) including their closure or change of Manager shall be notified in writing to the
Exchange within 24 hours. The Exchange will ensure monthly update of details of Office(s)/Branch Office(s) on its
website;
A board at a conspicuous place at the reception/front office will be displayed at all times containing the names of
persons duly authenticated by the Broker, who are authorized to deal with the customers;
No person shall be employed at an Office or a Branch Office if he has been convicted of any misdemeanor by the
Exchanges, Commission and/or any other competent authority;
The standard text provided by the Exchange after due approval of the Commission, disclosing the remedy and
process how to approach the Exchange in case of non-resolution of complaints must be displayed at all times at a
conspicuous location at the reception/front office of the Office(s)/Branch Office(s).
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Karachi Stock Exchange Regulations
22.3. ELIGIBILITY FOR THE PERSON APPOINTED AS A MANAGER OF THE BROKER’S OFFICE/BRANCH OFFICE:
The person to be appointed as a Manager of the Office/Branch Office shall fulfill the following conditions:
He is not less than 21 years of age.
He has not been convicted of any offense, involving fraud or breach of trust.
He has passed at least graduation examination and possesses at least one year experience as trader/agent in a
brokerage house.
(d) He has sufficient stock market experience and knowledge.
(e) He has not been adjudicated as insolvent or has suspended payments or has compounded with his creditors.
(f) NOC from his previous employer.
(a)
(b)
(c)
Provided that the above conditions shall not be applicable on the Individual Broker / Nominee Director of Corporate
Brokerage House supervising the Broker’s Main Office.
22.4. GRANT OF CERTIFICATE OF REGISTRATION:
On completion of all requirements, the Exchange shall grant a Certificate of Registration of Office/Branch Office in the
prescribed form annexed as (Annexure-C).
22.5. OBLIGATIONS OF A BROKER OPENING OFFICE/BRANCH:
22.5.1. DISPLAY OF NAME OF STOCK EXCHANGE BROKER:
The Broker desirous of opening office/branch within or outside Exchange must prominently display his/its name outside
the Broker’s Office/Branch Office
22.5.2. MAINTENANCE OF PROPER BOOKS OF ACCOUNTS, RECORDS ETC.:
The Broker shall keep and maintain all the client related record/information of the Office/Branch Office at the Head
Office/ Registered Office and shall make necessary arrangements to provide at all reasonable times respective
information/record to their clients dealing through such Office(s)/Branch.
22.5.3. DISPLAY OF REGISTRATION CERTIFICATE OF OFFICE/BRANCH OFFICE:
The Broker shall ensure display of the Registration Certificate of Office/Branch Office prominently at the
Office(s)/Branch Office(s).
(b) A Certificate of Registration of Manager as Agent with the Commission except in case of Broker’s Main Office.
(a)
22.5.4. A BOARD AT A CONSPICUOUS PLACE AT THE RECEPTION/FRONT OFFICE WHICH SHOULD CONTAIN:
(a)
(b)
(c)
(d)
Name of the person authorized to deal with the customers.
A warning that the branch cannot deal in cash, except as provided in the Standardized Account Opening Form.
That the customer must demand deliveries as per these Regulations.
That nobody is authorized to take deposit money on fixed profits which is illegal.
22.5.5. PUBLICATION:
A Broker shall in case of closure of his/its Branch Office or at the time of change of his/its Manager, whatever the case
maybe, publish a public notice in two (English and Urdu) newspapers having wide circulation in the province(s) where
registered office and Branch Office(s) is situated.
22.5.6. INSPECTION OF RECORDS:
The Exchange may ask for any information or documents and/or appoint one or more of its employees to undertake
inspection of the books of accounts, other records and documents of the Office(s)/Branch Office(s) maintained either at
the Head Office or any other Office/Branch Office and the Broker shall ensure to provide such information/documents
and assistance which may be required.
22.5.7. STATIONERY:
The Broker shall ensure that all stationery, i.e. confirmation/contract/cash memo/any other document will be issued only
in his name. The Broker(s) will also be required to clearly state on the printed stationery the addresses of all his
offices/branch offices simultaneously.
22.6. OFFICE(S)/BRANCH OFFICE(S) OF A CORPORATE BROKERAGE HOUSE:
A Corporate Brokerage House while opening Office(s)/Branch Office(s) shall also comply with all the above regulations
and shall provide the necessary information to the Exchange duly supported by the Board Resolution.
22.7. SUSPENSION, CANCELLATION OF REGISTRATION ETC. BY THE EXCHANGE:
If the Broker fails to comply with any of the provisions or requirement of these Regulations, the Exchange can take action
against such Broker(s) including suspension of registration of a particular office/branch and/or suspension of his/its TRE
Certificate.
Page 181 of 192
Karachi Stock Exchange Regulations
22.8. SUSPENSION OR CLOSURE OF OFFICE(S)/BRANCH OFFICE(S) BY THE BROKERS:
A Broker may suspend trading facility at the Office(s)/Branch Office(s) with a notice in writing to the Exchange. However,
it will be ensured that the Office(s)/Branch Office(s) remain open for a period of at least one month thereafter for disposal
of pending matters.
Page 182 of 192
Karachi Stock Exchange Regulations
Annexure-A
ON THE LETTERHEAD OF THE BROKER
Dated: ____________
The Managing Director
Karachi Stock Exchange Limited
Karachi.
APPLICATION FOR CERTIFICATE OF REGISTRATION
OF OFFICE/BRANCH OFFICE WITHIN/OUTSIDE THE EXCHANGE
Dear Sir,
I am/we are enclosing herewith the documents for grant of registration for opening of Office/Branch Office at
_____________________ and issuance of Certificate of Registration in this regard.
Thanking you.
PARTICULARS
1.
Name of the Broker with Code No.
_______________________________________
2.
Address of Office/Branch Office:
_________________________________________
Phone No.
_________________________________________
Fax No.
_________________________________________
3.
Form of Organization:
Single Member Company (SMC)
Financial Institution
Corporate Body other than SMC
_________________________________________
4.
Please
give
names
of
Proprietor
/
_________________________________________
Whether Broker of more than one Stock
_________________________________________
Directors:
5.
Exchange? If so, please give name(s) of
_________________________________________
the other Stock Exchange(s) with Code
6.
Number(s).
_________________________________________
Name of Manager along with CNIC and
_________________________________________
residential address.
_________________________________________
(In case of Broker’s Main Office, details of
Page 183 of 192
Karachi Stock Exchange Regulations
Broker/Nominee Director be mentioned)
7.
Whether the premises of Branch Office are
on ownership basis or rented. In case of
rented
8.
premises,
state
the
name
_________________________________________
of
landlord and provide a copy of Tenancy
_________________________________________
Agreement.
_________________________________________
List of employees, along with their CNICs
_________________________________________
and residential address.
9.
_________________________________________
List of authorized persons who will operate
bank accounts at the Office/Branch Office.
10. Details of Telephone Booth(s)
_________________________________________
_________________________________________
_________________________________________
_________________________________________
(In case of Broker’ Main Office)
I/we declare that the information given in this form is true to the best of my/our knowledge and belief.
I/we further undertake to abide by all the applicable Exchange in the matter.
Yours faithfully,
(Rubber Stamp of Broker)
(Signature of Broker)
Page 184 of 192
Karachi Stock Exchange Regulations
Annexure-B
UNDERTAKING
(On Non-Judicial Stamp Paper of Rs. 200/-)
I/we, ________________ Broker of the Karachi Stock Exchange Limited, having office at ____________ Karachi and an
applicant for Certificate of Registration for opening a Office/Branch Office within / outside the Exchange premises, hereby agree
and undertake as under:
1.
That I/we will abide by all these Regulations governing the trading and operations of Office/Branch Office, which are in
force and/or are amended from time to time.
2.
That I/we hereby undertake to stop trading facility at any our Office/Branch office with a notice in writing to the Exchange.
I/ we further undertake to ensure that the Office/Branch Office will remain open for disposal of pending matters for a
period of at least one month after the suspension of trading at the Office/Branch Office.
3.
That I/we undertake to settle all claims and transactions carried out by or through my/our Office/Branch with any outside
person(s) as per these Regulations.
4.
That I/we undertake that the stationery such as letterheads, receipts, various forms and stamps will bear the name of the
head office and no fake and manipulated stationery will be used.
5.
That I/we undertake that incase of removal of the Manager, I/we shall communicate such change to my/our respective
clients dealing with my/our Branch Office.
6.
That I/we undertake to provide any information/record asked by the Exchange from time to time and further undertake to
allow inspection of all my/our records and books maintained in relation to our Office/Branch, to any representative of the
Exchange at all times as and when desired.
7.
That I/we hereby undertake to indemnify you and promise to keep you indemnified against all losses, charges, penalties,
damages, expenses or other costs, which you may have to incur at any time, or in case of claims made by any authority
or any other person as a result of you relying on the above information provided by me.
8.
That whatever stated above is correct and true to the best of my/our knowledge and belief and nothing has been
concealed hereof.
Signed this undertaking on ______ day of ______, ______ in presence of the following witnesses.
Common Seal
Signature of the Broker
WITNESSES:
1.
__________________________________
Name: ____________________________
CNIC No.: _________________________
Address: __________________________
__________________________________
2.
__________________________________
Name: ____________________________
CNIC No.: _________________________
Address: __________________________
__________________________________
Page 185 of 192
Karachi Stock Exchange Regulations
Annexure-C
(On the Exchange Letter Head)
OFFICE/BRANCH OPENING AUTHORIZATION
Certified that Mr. /Mrs. /Miss. /M/s. __________________________________________ Code No. ________ having
his/her/their office at _____________________________, a Broker of the Karachi Stock Exchange Limited is hereby authorized
to operate an Office/Branch Office at __________________________________________________ subject to these
Regulations applicable in this behalf.
The persons authorized to manage and supervise the Office/Branch Office are Mr. /Mrs. /Miss. ___________________s/o, w/o,
d/o
_________________
holding
CNIC No. _________________________whose photograph and specimen signature are affixed on this Certificate.
This Certificate is issued for the purpose of prominently displaying at the above Office/Branch Office.
Issued at Karachi on this ____________ day of _________, _________.
PHOTOGRAPH
Specimen Signature
_______________
General Manager
Page 186 of 192
____________________
Deputy Managing Director
Karachi Stock Exchange Regulations
Chapter 23:
23.1.
SYSTEM AUDIT [REGULATORY COMPLIANCE] REGULATIONS
DEFINITIONS:
The terms used in this chapter shall have the following meanings:
(a)
(b)
(c)
“Audit" shall mean the System Audit of Brokers conducted as per these Regulations;
"Auditor(s)" shall mean the Auditor(s) selected, in accordance with the criteria approved by the Board on the
recommendation of RAC with the prior approval of the Commission;
“Report” shall mean the compliance report submitted by the Auditor under this chapter.
All other words and expressions used but not defined in these Regulations shall, unless there is anything repugnant in
the subject or context, have the same meanings as assigned to them in the Articles, Regulations of the Exchange,
Securities and Exchange Ordinance, 1969 (XVII of 1969) and the Companies Ordinance, 1984 ((XLVII of 1984) and
Rules and Regulations made there-under.
23.2.
PANEL OF AUDITORS:
23.2.1. The RAD shall declare from time to time, the Panel of Auditors who shall be eligible to conduct Audit of the Brokers. The
panel would consist of at least 10 Auditors and would fulfill the following prerequisites:
(a)
(b)
(c)
The Auditors shall be a Chartered Accountants firm within the meaning of the Chartered Accountants Ordinance,
1961; and
The Auditors must have been given a satisfactory rating under the Quality Control Review Program of the Institute of
Chartered Accountants of Pakistan;
The Auditors shall satisfy the criteria devised by the RAC from time to time.
23.2.2. Further, the RAD shall annually review the Panel of Auditors to ensure ongoing eligibility of auditors on the Panel in line
with the criteria.
23.2.3. No Auditor shall be appointed to conduct the Audit of a broker, if that Auditor has conducted the audit or other
assignment of such Broker, at any time during the past two years immediately preceding from the date of balloting in
which such Broker is selected for the Audit.
23.2.4. An officer of RAD designated by the RAC shall liaise with the Broker(s) and the Auditor(s) conducting the Audit of the
Brokers.
23.2.5. The list of Auditors eligible to conduct the Audit shall be placed on the website of the Exchange and the same shall be
updated as and when required.
23.3.
ELIGIBILITY FOR AUDIT:
A Broker who has operational track record of at least one year preceding the ballot may be selected for Audit under
these Regulations. The decision of the RAD through the ballot shall be binding on all the Brokers.
23.4.
SELECTION OF BROKERS:
23.4.1. The selection of Brokers for the Audit shall be through random balloting. All eligible Brokers, as explained in clause 23.3.
above, shall be audited once in each ‘cycle’ of two-year period. The selection shall be made through biannual balloting to
be held in every calendar year latest by 31st January and 31st July.
The RAD shall determine the total number of Brokers eligible for Audit at the ballot date in the remaining ballots of a
cycle by dividing the number of Brokers still to be audited in the cycle with the remaining ballots of the cycle to arrive at
the optimum number of Brokers to be audited in a ballot. Provided the Brokers audited in the last two ballots of a cycle
shall not be included in initial two ballots of the next cycle.
Explanation: If the total number of eligible Brokers at the first ballot of the cycle is 140. These shall be divided by 4
[number of ballots in 2 years]. Hence, 35 Brokers will be selected in the first ballot. At the next ballot date, assume that
total eligible Brokers have been reduced to 130, then the number of Brokers selected shall be 32 [130 less 35 audited in
previous ballot of a cycle divided by the 3 remaining ballots of a cycle].
23.5.
SCOPE OF AUDIT:
The Auditor shall carry out the Audit to ensure compliance with the requirements of the Securities and Exchange
Ordinance, 1969, the Securities and Exchange Rules, 1971, the Code of Conduct for Brokers as enshrined in the Third
Schedule of the Brokers and Agents Registration Rules, 2001, any other relevant rules/regulations of the Commission,
and directives/circulars/guidelines issued by the Commission/Exchange the Articles and these Regulations. However the
scope of Audit shall at least include the minimum activities as specified in Schedule-A hereof.
23.6.
AUDIT PERIOD:
The Audit period shall be preceding twelve months as specified by the Exchange.
Page 187 of 192
Karachi Stock Exchange Regulations
23.7.
AUDIT PROCESS AND STATUS OF COMPLIANCES:
23.7.1. The RAD shall intimate the selected eligible Brokers whose Audit is to be conducted as per these Regulations by 31st
JANUARY and 31st JULY of each year of their selection for Audit.
Within 30 days of intimation thereof, such Broker shall appoint an Auditor from the approved panel and submit the
Auditor’s declaration to the Exchange on the format prescribed by the Exchange from time to time.
23.7.2. If the Broker fails to appoint an Auditor within the time specified in these Regulations, the CRO shall appoint the Auditor
for such Broker within 14 days after expiry of the requisite time period and may impose a fine not exceeding Rs. 50,000/-.
23.7.3. Such Broker shall provide required access to the information and documents needed by the Auditor for the Audit and co-
operate with the Auditor for timely and smooth completion of the Audit.
23.7.4. Such Broker shall direct the Auditor to submit its Report directly to the CRO of the Exchange on the format prescribed by
the Exchange, within two months from the date of appointment of the Auditor.
23.7.5. The CRO shall forward to the Commission copies of the Reports of the Brokers audited, along with the views, counter
views and comments of the Brokers and the CRO on the discrepancies/observations, within 45 days of submission of the
Reports.
Provided that, if the Report highlights any material non-compliance by the Broker, such Report shall be immediately
forwarded to the Commission.
23.7.6. If the Report contains any non-compliance(s), the Broker shall rectify the same immediately and such Broker shall be
subject to limited scope audit in the following year to confirm that such Broker has now rectified the non-compliances
reported by the Auditor. The period for limited scope audit shall not be less than 3 months ensuring the discrepancies
identified in the Report are rectified and the Broker has remained compliant during the said period. The limited scope
audit may be conducted by the RAD itself, which shall not alter or affect the Broker’s normal selection process or timing
through random balloting. The CRO shall also provide a copy of such report of limited scope audit to the Commission
within 15 days of conclusion of the same.
23.8.
COSTS:
The Broker who is being audited shall pay all the fees, charges and costs of the Auditors. The said fees, charges and
costs shall be deposited with the Exchange, by the said Broker, for onward payment to the Auditor.
23.9.
SPECIAL AUDITS/INVESTIGATIONS:
The RAC and/or RAD in addition to the Audits conducted under these Regulations, may at any time, have a Broker
audited/inspected/investigated or itself conduct audit/inspection, with expanded, restricted or different scope or period of
audit given in these Regulations. Such audits/inspections/investigations, including but not limited to a financial audit and
a regulatory compliance audit, shall be at the cost of the Broker.
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Schedule-A
SCOPE OF AUDIT
1.
Client level compliance
Check the complete trail of following for selected clients.
1.1
The Standardized Account Opening Form (SAOF) of the selected clients is in compliance with the requirements of
these Regulations and any provision of such SAOF is not in contravention of the terms and conditions as laid down
in the Annexure-I to the chapter 4 of these Regulations.
1.2 Obtain the understanding of Broker’s Client Order mechanism.
If the orders for sale or purchase of securities are taken verbally by the Broker, check that Broker is authorized to
take verbal orders as per the SAOF or otherwise written instructions for orders for sale or purchase of securities to
the Broker are available.
For telephonic orders, also match the telephonic recording with orders placed.
1.3 Check that Broker has mandatorily collected margins from his clients in accordance with the chapter 19 of these
Regulations.
Further, applicable margins were available in the clients account and reflected in books of accounts in identifiable
and verifiable manner at the relevant times.
1.4 Check that confirmations are transmitted within twenty-four hours of execution of client order and such
confirmations complied with the requirements mentioned in chapter 4 of these Regulations.
Further, duplicates or counterfoils of memos/confirmation issued to clients are preserved for a period of not less
than five years.
1.5 Check that movements from clients’ Sub-accounts through free-delivery facility are made in accordance with the
CDC Regulations and/or after obtaining due authorization from clients.
1.6 Check that Broker has not pledged or deposited any security on account of a client as collateral in contravention of
the KSE Regulations and the CDC Regulations. Further, check that:- a) the details of ownership of Securities lying
in the house account of the Broker; b) bank-wise detail of Securities pledged with different financial
institutions/banks and stock exchanges.
1.7 Check in respect of selected clients that all transactions for buying, selling in all markets, margins, payments,
receipts, brokerage commissions charged, payable and receivable are recorded in records and books of accounts
[manually or electronically] in timely, adequate, proper, identifiable and in a manner verifiable on UIN / Client Code
basis. Further, check that:- a) Broker has disclosed the names of clients with provision of ageing of receivables and
payables; b) details of collaterals for all credit limits obtained by the Broker on behalf of clients and/or for the
proprietary account and the credit line sanctioned by any Financial Institution and the limits utilized by the Broker.
1.8 Check that the Broker has maintained record of extension or maintenance of credit or arranging for the extension or
maintenance of credit to the clients for the purpose of purchasing or carrying any security in compliance with the
relevant rules and regulations.
1.9 Check that the Broker has maintained record of borrowing on any security or lending or arranging for the lending of
any security carried for the account of the clients in compliance with the relevant rules and regulations.
1.10 Check that the Broker has maintained order register/Trading Systems generated daily activity log and order log
maintained by telephone recording, in compliance with the relevant rules and regulations.
1.11 Check that the Broker has provided quarterly account statement to each of its clients in a manner and with at-least
such information as prescribed under Chapter 4 of KSE Regulations.
1.12 The minimum suggested sample size for client level compliance is:
2.
50% or 100 clients whichever is less, out of which there must be 50% new clients’ (client registered in last 12
months); and
minimum 5 random orders at 5 different dates of each selected client are checked/confirmed with complete
trail of steps from placement of order till settlement of securities in their respective accounts.
Recording of Orders Placed through Telephone
2.1
2.2
2.3
2.4
2.5
2.6
Clients’ orders received and/or confirmed via telephonic [landline] communications must be recorded in the manner
specified by the Exchange.
Where orders are received by mobile phones, an appropriate and reliable recording of the time of receipt and order
details are being maintained.
Effective procedures are in place to ensure the integrity, reliability and security of the telephone recording system
and timely detection of any malfunctioning therein.
Adequate compliance monitoring is exercised over the office staff that is responsible for recording the telephone
order instructions.
Telephone recordings are being retained for a minimum period of six months or any other period specified by the
Exchange and/or Commission. Further, in case of any complaint lodged by an Investor, the Broker has retained the
record of such Investor till the resolution of the complaint.
All telephone lines under use of the traders, agents, dealers and authorized persons who are involved in trading,
are connected to the telephone recording system of the Broker.
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3.
Details to be printed on Broker's Correspondence and Contract Notes
Review that the Broker’s correspondence/contract notes relating to the transactions of business contain the information
as specified by the Exchange from time to time and bear the name of the Broker along with address of principal place of
business as per the KSE Regulations.
4.
Registration with the Commission
Review that the persons working as Agents of the Broker have obtained certificate of registration from the Commission
and such certificate of registration is being renewed every year.
5.
Branch Offices & Agents
In case the Broker has any branch office for conducting the business and trading of securities within and outside
premises of the Exchange:
5.1
5.2
Check that the Broker has obtained certificate of registration for all of its branch offices from the Exchange.
Check that the Broker has kept and maintained all the clients’ related records/information of the Office/Branch
Office at its head office.
5.3
Check that printed stationery of the Broker including confirmation/contract notes/cash memo/any other document
is issued only in the Broker’s name along with address of principal place of business.
Check that addresses of all offices/branches are clearly stated on such printed stationery.
5.4
Check that name of the Broker is prominently displayed outside the branch.
5.5
Check that Registration Certificate of Office/Branch Office is prominently displayed at the Office(s)/Branch
Office(s).
5.6
Check that the Certificate of Registration of manager as Agent with the Commission except in case of Broker’s
Main Office is displayed.
5.7
Check that a board at a conspicuous place at the reception/front office is displayed which contains the
requirements as mentioned in chapter 22 of these Regulations for conducting the business and trading of
securities within and outside the Exchange.
5.8 a) Obtain list of all agents from the Broker and check that Broker properly maintains the register [manual or
electronic form] of accounts of all agents.
b) Check that list of agents is matched with list of registered agents appearing in the records/website of the
Exchange.
c) Review that all the managers of the branch offices have obtained certificate of Registration from the Commission
and such Certificate of Registration is being renewed every year.
d) Verify the transactions to ensure that the agent does not deal with his clients in his own name. Dealing with clients
includes receiving cash or cheque from the client in the agent's own name and issuing cash memos, receipts,
delivery notes or any other document in his name.
5.9
Review the authority given to the agent or employee to perform all acts on behalf of the Broker.
Review the agreement with the agent specifying the scope of authority and responsibilities of the Broker and his
agent.
5.10
5.11
5.12
5.13
6.
Check that the business being done at the branch office is in the name of the Broker.
Check that the remedies available to investors and procedures for dispute resolution and arbitration in case of
non-resolution of complaints are displayed at all times at a conspicuous location at the reception/front office of the
Office(s)/Branch Office(s).
Check that branch offices’ bank accounts are maintained in the name of the Broker.
Check that customer accounts are properly maintained or electronically accessible at the branch offices.
Segregation of Clients’ Assets
Review compliance with the following as required in chapter 4 of these Regulations:
6.1
The Brokers shall ensure that the assets belonging to their clients are kept separated from the assets of the
Brokers. For this purpose, the Brokers:
(a) shall maintain necessary records and books of accounts to distinguish clients’ funds and securities from
Broker’s funds and securities including maintenance of a separate bank account(s), with word “clients” in the
title, which will include all the funds of their clients along with record/breakdown of clients’ balances and
mutual agreement in writing between client and Broker for payment of profits to the clients out of the total
profit accrued on unutilized funds of such clients in case such funds are deposited in a profit-bearing bank
account by the Broker.
(b) shall maintain separate sub-accounts under his Participant Account in CDS for each of his clients to maintain
the custody of margins deposited by the clients in the form of securities and securities bought for clients.
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(c) may maintain a Collateral Account under his Participant Account in CDS for all clients. This account shall be
used exclusively for instances where outstanding payment has not been received from clients in respect of
securities purchased on their behalf and relevant purchase obligation is to be settled. In such cases, the
Broker will be allowed to transfer the securities on the respective settlement date from the respective subaccount to the Collateral Account for a maximum period of three (3) settlement days only to the extent of the
transaction volume for which the client’s payment is outstanding for whatsoever reason and comply with
relevant requirements contained in the CDC Regulations. The Broker shall, in addition to the electronic
reporting of such transfers through ways and means as specified by the Exchange report the Exchange in
writing explaining the reason for utilizing the Collateral Account and / or for holding client’s securities
immediately after such transfer. The notice from the Broker will be accompanied with following documents:
(i) Non-payment notice served on the client through courier, personal delivery method with
acknowledgement due, facsimile, email or properly recorded telephone line, advising him to make
payment by the close of banking hours on the next business day after the settlement day and notifying
that otherwise the Broker shall have a right to dispose off the required securities to cover the shortfall in
the client’s account at client’s risk and cost;
(ii) Client’s sub-account and Collateral Account Activity Report of movement date and;
(iii) Documentary evidence substantiating the genuineness and circumstances of the reason for nonpayment by the client which may include failure of client to pay in time due to non-clearance of client’s
cheque, any natural calamity, law and order situation, non or delayed functioning of an automated
procedure, e.g., NIFT.
Provided that for a particular client, the Broker is allowed to transfer securities from the sub-account of
client to the Collateral Account only once in a calendar month.
6.2
6.3
7.
Trading by employees of the Broker
7.1
7.2
7.3
7.4
7.5
8.
Except as permitted above, the clients’ funds and securities shall not be used by the Broker for any purpose other
than as authorized by the client in writing in the manner and procedure prescribed by the Exchange and/or CDC.
The Broker shall be obliged to maintain and furnish documentary evidence to substantiate the compliance with the
above regulations as and when required by the Exchange.
On the basis of documents mentioned under clause 6.1.(c) above, the Exchange shall determine if the requisite
documents substantiate the transfer of client’s securities by the Broker and shall maintain a database of such
transfers. Exchange may also carryout enquiry and/or special audit in relation to non-compliance with this
regulation.
Check that employees of the Broker who wish to trade have obtained prior written authorization from the Broker.
Check that the Broker has registered all its employees into the UIN database with all registration details including
their respective designations and updates/modifies the registration details whenever any change occurs.
Check that employees (who are trading) have submitted to the Broker a written undertaking of their understanding
and willingness to strictly abide by all the relevant rules, regulations, codes and procedures as prescribed by the
Commission, the Exchange, CDC and NCCPL.
Check that a mechanism is in place by the Broker to monitor their employees’ trades regularly.
Check that the Compliance Officer/Internal Audit Department of the Broker ensures compliance of relevant rules &
regulations and any violation is communicated to Audit Committee/Chief Executive Officer of the Broker in case of
a Corporate Brokerage House.
Illegal Financing
Check that Broker has not carried on any financing, borrowing, lending and pledging activity which is in contravention of
applicable rules and/or regulations.
9.
Internet Trading
If the Broker is providing Internet Trading services, check that the Broker has fully complied with the following in
accordance with chapter 9 of these Regulations:
9.1
9.2
9.3
9.4
9.5
9.6
9.7
10.
The Broker has minimum net worth as prescribed in the chapter 9 of these Regulations.
The Broker has well-defined procedures for allowing clients’ access to its Internet Based Trading System (IBTS)
including agreement with the Broker, assigning of trading limits, placement and execution of clients’ orders, mode
and timing of reporting of trade confirmation to the clients and margin requirements and margin calls. Further, the
above procedures are available in writing and on the Broker’s website for easy access by the clients.
The Broker has maintained monthly reports on the reliability and compliance status of the IBTS.
The Broker has not continued to provide IBTS without a valid internet trading certificate which has not been
suspended or cancelled during such period.
The Broker’s service requirements are as per the requirements given in the applicable Regulations.
The Broker has sufficient infrastructure, internal control procedures and technological and security measures and
its encryption technology complies with the minimum requirements as prescribed by the Exchange from time to
time.
The Broker’s website meets all requirements as stipulated under the chapter 9 of these Regulations.
Leveraged Trading
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10.1
10.2
10.3
10.4
10.5
10.6
11.
Check that no transaction is executed by the Broker on behalf of a client in the Leveraged Market unless an
appropriate agreement has been executed between the Broker and such client.
Check the Broker has fully disclosed all risks involved in the relevant transactions and has obtained a written
confirmation from the client that they have understood and have the ability to bear the risks in such transactions.
Check that the Broker has fully disclosed and explained the options available to a client in respect of various
financing facilities in the securities markets.
Check the Broker has evaluated the credit worthiness of the clients through a proper credit risk assessment
methodology. Also check that credit limits are assigned to each client beyond which the client shall not be allowed
to take a position in the Leveraged Market.
Check that adequate records are maintained by the broker, evidencing compliance with the clauses 10.1 to 10.4
above.
Minimum suggested sample size is 50 leveraged clients or 10% of leveraged clients whichever is lower.
General Obligations of the Broker
The Auditor shall also check the compliance in respect of the following:
11.1
11.2
11.3
11.4
11.5
11.6
11.7
11.8
12.
The Broker has not advertised his business publicly unless permitted by the Exchange, as required by Clause C-4
of Code of Conduct of the Brokers and Agents Registration Rules, 2001;
All traders employed and working with the Broker meet the eligibility criteria mentioned in Rule 3(1) of Brokers’
Agents and Traders (Eligibility Standards) Rules, 2001;
The Broker has not, without the special permission of the Board, taken into or continued in his employment in any
capacity in any business carried on by him, a former TRE Certificate Holder who has been suspended or expelled,
as required by these Regulations;
The Broker has circulated research reports on securities only to its clients, joint stock companies and banks and
such reports are not published in press and general circulation as required by the chapter 4 of these Regulations;
The Broker has taken prior permission of the Board, to carry on business for or with a person who has been
declared a Defaulter by the Exchange and notice regarding such prohibition has been issued by the Exchange;
As laid down in chapter 4 of these Regulations, the Broker has formulated and implemented an effective KnowYour Customer (KYC) and Customer Due Diligence (CDD) internal policy and framework in accordance with the
guidelines issued by the Exchange with the prior approval of the Commission and any notices/circulars issued by
the Commission from time to time. Further, the said policy has been appropriately communicated to all the agents
and branches of the Broker and the Broker has ensured that the said policy is understood by the relevant
personnel;
All provisions of the Anti-Money Laundering Act, 2010 (Act VII of 2010) and any rules and regulations made thereunder are complied with at all times;
The Broker has activated SMS and/or e-alerts services provided by the CDC to its clients.
Sampling Technique
While selecting a sample for the verification, the Auditor shall use random sampling technique to ensure that the selected
sample is true representative of the population and its result can reasonably be used to draw conclusion for the whole
population.
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Chapter 24:
24.1.
INVESTORS’ PROTECTION FUND (IPF) REGULATIONS
DEFINITIONS:
In this chapter, unless the subject or context otherwise requires:
(a)
(b)
24.2.
"Fund" means the KSE Investors Protection Fund;
"Investor" means a person, not being a TRE Certificate Holder, his agent or representative, who has bought or sold
any of the securities listed on the Exchange.
ESTABLISHMENT OF FUND:
The Board shall establish the Fund with contributions as follows:
(a)
(b)
(c)
24.3.
An initial contribution of Rs. 20 million by the Exchange out of the CHPF.
Allocation of a percentage of Trading Fee (Laga) as may be determined by the Board from time to time paid by the
Broker.
The Fund shall be made available for utilization in the event of default as well as in case of cancellation/forfeiture of
TRE Certificate of a TRE Certificate Holder/expulsion of a Member due to his failure or refusal to abide by or carry out
the award of arbitrator(s) or for non-settlement of Investors’ claims as directed by the Board.
ELIGIBILITY OF CLAIMS:
All claims of Investors arising out of transactions entered into as per these KSE Regulations and/or the regulations of
NCCPL and approved by the Board/Committee constituted by the Board shall be eligible for consideration under these
regulations.
24.4.
PROCEDURE FOR SETTLEMENT OF CLAIMS:
24.4.1. In the event of default/expulsion/cancellation or forfeiture of TRE Certificate of a TRE Certificate Holder, if the investors’
claims admitted by the Exchange against such a TRE Certificate Holder are more than the amount available out of sale
proceeds of assets of such TRE Certificate Holder for satisfying such claims, in accordance with the relevant regulations
of the KSE Regulations for the time being in force, all the claims will be paid on prorate basis. The claims still remaining
unsatisfied after pro-rata sharing shall then be paid from the Fund by utilizing up to aggregate amount of Rs.25 million, in
the following order of priority, whereby the per claimant distribution shall, in any case, not exceed the amount of claim.
(a)
(b)
Initial Disbursement of up to a maximum of Rs.100,000/- equally per claimant among all claimants by utilizing 50%
of maximum allowable contribution i.e. Rs.12.5 million. Such disbursement shall either be made to satisfy all claims
or, if insufficient to settle all claims, be disbursed equally among all the claimants.
Remaining amount to be disbursed by utilizing balance 50% of maximum allowable contribution i.e. Rs.12.5 million
plus any unutilized portion of Fund as stated at 24.4.1.(a) above. In case, such amount of Fund is insufficient to
satisfy all such claims in full, then pro-rata distribution will be made.
24.4.2. The admitted claims of investors which remained unsatisfied or partially satisfied after pro-rata sharing against a TRE
Certificate Holder/Member declared defaulter/ expelled or whose TRE Certificate was cancelled/ forfeited, on or after 1st
August 2008 uptill the date specified by the Exchange with prior approval of the Commission, shall continue to be paid
from the Fund to the extent of maximum amount of Rs.75 million in the manner and order of priority then prevailing i.e.
(a)
(b)
Initial disbursement of Rs. 500,000 equally among all claimants by utilizing upto 50% of permissible contribution i.e.
Rs.37.5 million; and
Remaining claim amount by utilizing balance 50% i.e. Rs.37.5 million plus any amount remaining unutilized out of
initial disbursement, after deducting the amount already contributed by the Fund, if any, to satisfy each investor’s
claim. In case, such amount of Fund is insufficient to satisfy all such claims in full, then pro-rata distribution will be
made.
24.4.3. Notwithstanding anything contained hereinabove, the Board may in the event of default/expulsion/cancellation or
forfeiture of a TRE Certificate of a TRE Certificate Holder/Member where proceeds of assets of such TRE Certificate
Holder/Member as prescribed in the relevant regulations of the KSE, are not immediately available, for any reason
whatsoever, in the interest of the investors, allow settlement of investors’ admitted claims first from the Fund to the extent
of the maximum permitted amount under sub-clauses 24.4.1. or 24.4.2. above. However, in cases of expulsion of a
Member or cancellation/forfeiture of TRE Certificate of a TRE Certificate Holder, where the proceeds of such assets
become available subsequently, then after satisfaction in full of all claims as provided for in 20.11., any amount
remaining unutilized out of the sale proceeds of such assets, shall be deposited in the Fund.
24.4.4. Provided that in case of default of a TRE Certificate Holder/Member, any amount remaining unutilized out of the sale
proceeds of the defaulter’s assets sold subsequently shall after settlement of claims as stated in sub-clauses 21.6.6. and
21.8.1., be deposited in the Fund in accordance with sub-clause 21.8.2.
24.5.
MANAGEMENT OF THE FUND:
The Management of the Fund shall vest in the Trustees as provided in the KSE Investors’ Protection Fund Trust Deed.
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